<PAGE> 1
THE GOVETT FUNDS, INC.
SAN FRANCISCO, CALIFORNIA
June 30, 2000
Dear Shareholder:
On November 10, 1999, the Board of Directors of The Govett Funds, Inc. met
to consider and approve a proposal for reorganizing the following Govett Funds
into the following ARK Funds portfolios.
<TABLE>
<CAPTION>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
<S> <C>
Govett Global Income Fund ARK Income Portfolio
Govett Smaller Companies Fund ARK Small-Cap Equity Portfolio
Govett International Equity Fund ARK International Equity Selection
Portfolio
(or ARK International Equity Portfolio
as discussed below)
Govett Emerging Markets Equity Fund ARK Emerging Markets Equity Portfolio
</TABLE>
After carefully studying the merits of the proposal, the Board determined
that the reorganization is in the best interests of shareholders.
Since the Board has approved the proposed reorganization, you and your
fellow shareholders are being asked to approve the proposal at a Special Meeting
of Shareholders to be held at 25 South Charles Street -- 16th Floor, Baltimore,
Maryland 21201 on August 4, 2000. A proxy card is enclosed for use in the
Special Meeting. This card represents shares you held as of the record date, May
18, 2000. IT IS IMPORTANT THAT YOU COMPLETE, SIGN, AND RETURN YOUR PROXY CARD IN
THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.
If the shareholders of your fund approve the proposed reorganization of
your fund and certain other conditions are satisfied, you will be able to
continue your investment program through ownership of shares of the
corresponding ARK Funds portfolio, each of which is a mutual fund having similar
investment objectives and policies to your Govett Fund(s). As an ARK Funds
shareholder, you will enjoy access, through the exchange privilege, to a much
larger family of funds than Govett Funds currently offers. Access to a larger
family of funds will provide you with a convenient way to diversify your
investments.
I encourage you to review the attached materials in detail. Some of your
questions may be answered on the next page. Some important facts about the
proposed reorganizations are outlined below.
- The reorganizations will not affect the value of your account. No sales
charges or redemption fees will be applied in connection with the
reorganizations, and
- None of the Govett Funds or their shareholders will recognize any gain or
loss for federal income tax purposes as a result of the reorganizations.
Because the reorganizations apply to all Govett Funds (other than Govett
International Smaller Companies Fund), we have grouped the funds on one proxy
statement to reduce costs. If you hold shares in more than one fund, you will
receive a proxy card for each fund you own. Please vote each proxy card you
receive.
Because the Board believes that the reorganizations are in the best
interests of all shareholders, we encourage you to vote "for" the proposal.
Should you have any additional questions, we invite you to call The Govett
Funds, Inc. toll free at 1-800-821-0803.
Sincerely,
Keith E. Mitchell
Managing Director
AIB Govett, Inc.
<PAGE> 2
Q. WHY HAVE I RECEIVED THIS PACKAGE?
A. The Govett Funds, Inc. has entered into an Agreement and Plan of
Reorganization with ARK Funds. Under the agreement, the Govett Global Income
Fund will be combined with the ARK Income Portfolio; Govett Smaller
Companies Fund will be combined with the ARK Small-Cap Equity Portfolio;
Govett International Equity Fund will be combined with the ARK International
Equity Selection Portfolio or, if proposed investment policy and other
changes are not implemented, the ARK International Equity Portfolio; and
Govett Emerging Markets Equity Fund will be combined with the ARK Emerging
Markets Equity Portfolio (which Portfolio will have nominal assets and
liabilities before such combination). Your Govett Fund shares will be
exchanged for shares of the corresponding ARK portfolio. The Board of Govett
Funds has approved the proposed reorganizations. You, as a shareholder of
any one or more of the Govett Global Income Fund, Govett Smaller Companies
Fund, Govett International Equity Fund, or Govett Emerging Markets Equity
Fund, are now being asked to approve the proposal.
Q. WHY ARE THE REORGANIZATIONS BEING PROPOSED?
A. The Board of Govett Funds believes that combining the Govett Funds with the
corresponding ARK portfolios could result in more efficient operations and
further growth of assets. Also, as a result of these transactions,
shareholders of the Govett Funds will become part of a larger mutual fund
family with more fund portfolios including some types of funds that the
Govett Funds currently do not offer. As an ARK Funds shareholder, you will
have access to these funds through the ARK Funds' exchange privilege. In
addition, the Govett Funds and the ARK portfolios with which they will be
combining have similar investment objectives as described in more detail in
the Prospectus/Proxy Statement.
Q. HOW WILL THIS AFFECT ME AS A GOVETT FUNDS SHAREHOLDER?
A. You will become a shareholder of an ARK Funds portfolio with similar
investment objectives and policies as the Govett Funds you currently hold.
As an ARK Funds shareholder, you will have access to the wide array of fund
portfolios offered by ARK Funds. There will be no sales charges or
redemption fees applied in connection with this transaction. The shares of
the ARK Funds portfolio(s) that you receive will have a total net asset
value equal to the value of the Govett Funds shares you held as of the
closing date of the reorganizations.
Q. WILL THE REORGANIZATIONS RESULT IN ANY TAXES?
A. Neither the Govett Funds nor its shareholders will recognize any gain or
loss for federal income tax purposes as a result of the reorganizations.
Q. WILL THE INVESTMENT ADVISER CHANGE?
A. Yes. AIB Govett, Inc. currently serves as investment adviser to the Govett
Funds and AIB Govett Asset Management Limited serves as investment
subadviser. Allied Investment Advisors, Inc. serves as the investment
adviser to the ARK Funds. Allied Investment Advisors, Inc. will continue to
serve as investment adviser to the ARK Funds, including the ARK Income
Portfolio, the ARK Small-Cap Equity Portfolio, ARK Emerging Markets Equity
Portfolio, and ARK International Equity Selection Portfolio. AIB Govett,
Inc. will serve as investment subadviser to the ARK International Equity
Selection Portfolio and ARK Emerging Markets Equity Portfolio after the
reorganizations.
Q. WHAT FUND(S) WILL I HOLD FOLLOWING THE REORGANIZATIONS?
A. Govett Fund shareholders will receive shares of the following corresponding
ARK portfolios.
i
<PAGE> 3
<TABLE>
<CAPTION>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
<S> <C>
Govett Global Income Fund ARK Income Portfolio
Govett Smaller Companies Fund ARK Small-Cap Equity Portfolio
Govett International Equity Fund ARK International Equity Selection
Portfolio(1)
Govett Emerging Markets Equity Fund ARK Emerging Markets Equity Portfolio
</TABLE>
---------------
(1) If proposed investment policy and other changes are not implemented,
shareholders of Govett International Equity Fund will receive shares of ARK
International Equity Portfolio.
Q. HOW DOES THE BOARD OF THE GOVETT FUNDS RECOMMEND THAT I VOTE?
A. After careful consideration, the Board of Govett Funds unanimously
recommends that you vote "FOR" the proposed reorganizations.
Q. HOW DO I CONTACT YOU?
A. If you have any questions, call Govett Funds toll free at 1-800-821-0803.
PLEASE VOTE.
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
ii
<PAGE> 4
THE GOVETT FUNDS, INC.
3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406-0903
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of the
Govett Global Income Fund, Govett Smaller Companies Fund, Govett Emerging
Markets Equity Fund, and Govett International Equity Fund will be held at 25
South Charles Street -- 16th Floor, Baltimore, Maryland 21201 on August 4, 2000,
at 3:00 p.m. Eastern Time, for the following purposes:
ITEM 1. To consider and act upon a proposal to approve an Agreement and
Plan of Reorganization (the "Reorganization Agreement"), between
ARK Funds and The Govett Funds, Inc. ("Govett Funds"), and the
transactions contemplated thereby, including: (a) the transfer of
all the assets of the Govett Global Income Fund, Govett Smaller
Companies Fund, Govett Emerging Markets Equity Fund, and Govett
International Equity Fund (collectively, the "Acquired Funds") of
Govett Funds to, and the assumption of the stated liabilities of
each Acquired Fund by, a corresponding portfolio of ARK Funds
(collectively, the "Acquiring Funds"), in exchange for shares of
such Acquiring Fund; (b) the distribution of the Acquiring Funds
shares so received by the Acquired Funds pro rata to shareholders
of the Acquired Funds; and (c) the termination of the Acquired
Funds.
ITEM 2. To transact such other business as may properly come before the
meeting and any adjournment thereof.
The proposed reorganizations and related matters are described in the
attached Prospectus/Proxy Statement. A copy of the Reorganization Agreement is
attached to the Prospectus/Proxy Statement as Appendix A.
Only shareholders of record on May 18, 2000 of the Govett Global Income
Fund, Govett Smaller Companies Fund, Govett Emerging Markets Equity Fund, and
Govett International Equity Fund are entitled to notice of and to vote at the
Special Meeting and any adjournment thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY CARD(S). THIS IS IMPORTANT TO ENSURE A QUORUM AT
THE MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
SUBMITTING A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY
ATTENDING THE MEETING AND VOTING IN PERSON.
John Hunt
Secretary
June 30, 2000
<PAGE> 5
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<PAGE> 6
PROSPECTUS/PROXY STATEMENT
Dated June 30, 2000
ARK FUNDS
OAKS, PENNSYLVANIA 19456
TELEPHONE 1-888-4ARK-FUND
THE GOVETT FUNDS, INC.
3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406-0903
TELEPHONE 1-800-821-0803
This Prospectus/Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of The Govett Funds, Inc.
("Govett Funds") in connection with the Special Meeting of Shareholders (the
"Meeting") to be held at 25 South Charles Street -- 16th Floor, Baltimore,
Maryland 21201 on August 4, 2000 at 3:00 p.m. Eastern Time, at which
shareholders will be asked to consider and approve reorganizations of the
Acquired Funds into the corresponding Acquiring Funds as set forth in the table
below.
<TABLE>
<CAPTION>
ACQUIRED FUNDS ACQUIRING FUNDS
-------------- ---------------
<S> <C>
Govett Global Income Fund ARK Income Portfolio
Govett Smaller Companies Fund ARK Small-Cap Equity Portfolio
Govett International Equity Fund ARK International Equity Selection Portfolio
or ARK International Equity Portfolio(1)
Govett Emerging Markets Equity Fund ARK Emerging Markets Equity Portfolio
</TABLE>
---------------
(1) Shareholders of the Govett International Equity Fund are being asked to
approve a reorganization into the ARK International Equity Selection
Portfolio. The reorganization will not occur unless Govett shareholders
approve and, in addition, ARK shareholders approve certain changes to the
ARK International Equity Selection Portfolio. As a result, Govett
shareholders are also being asked to approve an alternative reorganization
into ARK International Equity Portfolio, which has been organized for the
purpose of continuing the investment operations of Govett International
Equity Fund should the ARK shareholders not approve the changes to the ARK
International Equity Selection Portfolio.
ARK Funds and Govett Funds are open-end, series, management investment
companies whose investment advisors are affiliated with Allied Irish Banks,
p.l.c. In approving the reorganizations, the Govett Funds' Board of Directors
considered, among other things, that combining the assets of the Acquired Funds
with the Acquiring Funds could result in more efficient operations, that the
Acquired Funds and Acquiring Funds have similar investment objectives and
policies, that the investment advisors of the Acquired Funds and the Acquiring
Funds are affiliated, that the interests of shareholders of the Acquired Funds
would not be diluted as a result of the reorganizations, and that the
reorganizations would be tax-free transactions.
This Prospectus/Proxy Statement constitutes the proxy statement of the
Govett Funds for the Meeting and the prospectus for the shares of ARK Funds that
have been registered with the Securities and Exchange Commission ("SEC") and are
to be issued in connection with the reorganizations of the Acquired Funds.
The reorganizations will be effected by the transfer of assets and stated
liabilities of an Acquired Fund in exchange for Retail Class A or Institutional
Class shares, as applicable, of the corresponding Acquiring Fund. On the day of
the reorganization, each Acquired Fund shareholder will receive shares of the
corresponding Acquiring Fund, of the same class as their shares in the Acquired
Fund (Class A Retail or Institutional Class) and with the same total value as
their Acquired Fund shares. However, the number of shares each Acquired Fund
shareholder receives, and the price per share, will be different, depending on
the net asset values per share of the Acquiring and Acquired Funds on the
reorganization date. After the reorganizations, the Acquired Funds will be
dissolved.
<PAGE> 7
ARK Income Portfolio, ARK Small-Cap Equity Portfolio, and ARK International
Equity Selection Portfolio are currently conducting investment operations as
described in this Prospectus/Proxy Statement. ARK Emerging Markets Equity
Portfolio has recently been organized for the purpose of continuing the
investment operations of Govett Emerging Markets Equity Fund. ARK International
Equity Portfolio also has been organized for the purpose of continuing the
investment operations of Govett International Equity Fund if certain changes to
ARK International Equity Selection Portfolio are not approved by its
shareholders. If those changes are not approved, then Govett International
Equity Fund would be merged into ARK International Equity Portfolio rather than
ARK International Equity Selection Portfolio.
This Prospectus/Proxy Statement sets forth certain information that a
shareholder should know before voting on the reorganizations and should be
retained for future reference.
The Retail Class A and Institutional Class Prospectus dated June 30, 2000
of ARK Funds, which describes the Acquiring Funds, accompanies this
Prospectus/Proxy Statement. Additional information is contained in:
- the Statement of Additional Information dated June 30, 2000, relating to
this Prospectus/Proxy Statement;
- the Statement of Additional Information dated June 30, 2000 of ARK Funds;
- the ARK Funds' Annual Report for the fiscal year ended April 30, 1999 and
Semi-Annual Report for the six months ended October 31, 1999;
- the Class A Retail and Institutional Class Prospectus and the Statement
of Additional Information of Govett Funds, each dated May 1, 2000; and
- the Govett Funds' Annual Report for the fiscal year ended December 31,
1999.
Each of these documents is on file with the SEC and is available without
charge upon request by writing or calling either ARK Funds or Govett Funds at
their respective addresses or telephone numbers set forth above. The information
relating to the Acquiring Funds contained in the ARK Funds' Prospectus dated
June 30, 2000, the Statement of Additional Information dated June 30, 2000, the
Annual Report for the fiscal year ended April 30, 1999, and the Semi-Annual
Report for the six months ended October 31, 1999 is incorporated herein by
reference.
The Govett Funds' Prospectus and Statement of Additional Information dated
May 1, 2000 and Annual Report for the fiscal year ended December 31, 1999 are
also incorporated herein by reference.
This Prospectus/Proxy Statement is expected to be first sent to
shareholders on or about July 5, 2000.
SHARES OF ARK FUNDS AND GOVETT FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE
SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY ARK FUNDS OR GOVETT FUNDS.
ii
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY..................................................... 1
Proposed Reorganizations.................................. 1
Board Considerations...................................... 1
Reasons for the Reorganizations........................... 1
Federal Income Tax Consequences........................... 1
Overview of Govett Funds and ARK Funds.................... 2
Investment Objectives and Policies..................... 2
Management and Arrangements with Service Providers..... 3
Comparative Fee Tables................................. 4
Purchases.............................................. 12
Exchanges.............................................. 12
Dividends and Distributions............................ 13
Redemption Procedures.................................. 13
Voting Information........................................ 13
RISK FACTORS................................................ 14
FINANCIAL HIGHLIGHTS........................................ 17
INFORMATION RELATING TO THE PROPOSED REORGANIZATION......... 17
Description of the Reorganization Agreement............... 17
Board Considerations...................................... 18
Capitalization............................................ 18
Federal Income Tax Consequences........................... 19
INFORMATION RELATING TO VOTING MATTERS...................... 20
General Information....................................... 20
Shareholder Approval...................................... 20
Quorum.................................................... 23
Annual Meetings........................................... 23
ADDITIONAL INFORMATION ABOUT THE ACQUIRING AND ACQUIRED
FUNDS..................................................... 23
LEGAL MATTERS............................................... 23
EXPERTS..................................................... 24
OTHER BUSINESS.............................................. 24
SHAREHOLDER INQUIRIES....................................... 24
APPENDIX A.................................................. A-1
APPENDIX B.................................................. B-1
APPENDIX C.................................................. C-1
APPENDIX D.................................................. D-1
</TABLE>
iii
<PAGE> 9
(This page intentionally left blank)
<PAGE> 10
SUMMARY
The following is a summary of certain information relating to the proposed
reorganizations, and is qualified by reference to the more complete information
contained elsewhere in this Prospectus/Proxy Statement and the Appendices
attached.
PROPOSED REORGANIZATIONS. The Board of Directors of Govett Funds, and the
Board of Trustees of ARK Funds, including in each case the directors/trustees
who are not "interested persons" of ARK Funds or Govett Funds, within the
meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended
(the "1940 Act") (the "Boards"), propose that the Acquired Funds reorganize into
the corresponding Acquiring Funds as set forth in the table below, and that each
Acquired Fund shareholder become a shareholder of the corresponding Acquiring
Fund.
<TABLE>
<S> <C>
Acquired Funds Acquiring Funds
---------------- -----------------
Govett Global Income Fund ARK Income Portfolio
Govett Smaller Companies Fund ARK Small-Cap Equity Portfolio
Govett International Equity Fund ARK International Equity Selection Portfolio
or ARK International Equity Portfolio(1)
Govett Emerging Markets Equity Fund ARK Emerging Markets Equity Portfolio
</TABLE>
---------------
(1) If proposed investment policy and other changes are not implemented, Govett
International Equity Fund would reorganize into ARK International Equity
Portfolio.
The reorganizations will have two steps:
- First, if the shareholders of an Acquired Fund approve the
reorganization, the Acquired Fund will transfer substantially all of
its assets and liabilities to its corresponding Acquiring Fund. In
exchange, Acquired Fund will receive shares of its corresponding
Acquiring Fund with a total value equal to the value of the assets it
is transferring (net of the Acquired Fund's liabilities).
- Second, the Acquired Fund will dissolve. Each Acquiring Fund will open
an account for each corresponding Acquired Fund's shareholder, and
will credit each shareholder with shares of the Acquiring Fund of the
same class and with the same total value as the Acquired Fund shares
that the shareholder owned on the date of the reorganization. New
share certificates will not be issued.
No sales charge or fee of any kind will be charged to Acquired Fund
shareholders in connection with the reorganizations.
BOARD CONSIDERATIONS. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, the Boards have determined that the reorganizations are
in the best interests of shareholders of the Acquired Funds and the Acquiring
Funds, respectively, and that the interests of existing shareholders of the
Acquired Funds and the Acquiring Funds, respectively, will not be diluted as a
result of the reorganizations. See "Information Relating to the Proposed
Reorganizations -- Board Considerations."
REASONS FOR THE REORGANIZATIONS. The primary reasons for each of the
proposed reorganizations are: (a) more efficient operations due to combining the
assets of the Acquired Funds with the Acquiring Funds; (b) the opportunity for
the shareholders of each Acquired Fund to participate in a larger family of
mutual funds through the exchange privilege offered by ARK Funds; (c) the
similarity of the investment objective and policies of each Acquired Fund and
the corresponding Acquiring Fund; (d) the fact that the investment advisors of
the Acquired Funds and the Acquiring Funds are under common control and there
would be a continuation of several of the same personnel and resources; (e) the
fact that shareholder interests would not be diluted in the proposed
reorganizations; and (f) the status of each reorganization as a tax-free
reorganization.
FEDERAL INCOME TAX CONSEQUENCES. Shareholders of each Acquired Fund will
not recognize any gain or loss for federal income tax purposes as a result of
their receipt of Retail Class A or Institutional Class shares of
<PAGE> 11
the corresponding Acquiring Funds. The Acquired Funds and shareholders of each
Acquired Fund will not incur any material federal income taxes as a result of
the reorganizations, and no Acquiring Fund will recognize gain or loss for
federal tax purposes on its issuance of shares in the reorganizations. See
"Information Relating to the Proposed Reorganizations -- Federal Income Tax
Consequences."
OVERVIEW OF GOVETT FUNDS AND ARK FUNDS.
Investment Objectives and Policies
Govett Emerging Markets Equity Fund/ARK Emerging Markets Equity
Portfolio. The investment objectives and policies of Govett Emerging Markets
Equity Fund and ARK Emerging Markets Equity Portfolio are identical. Both funds
have an investment objective of long-term capital appreciation. They seek to
achieve their investment objective by investing primarily in equity securities
of issuers located in emerging market countries. Both funds may invest in debt
obligations convertible into equity securities, and in non-convertible debt
securities when their advisors believe these non-convertible securities present
favorable opportunities for capital appreciation. Under normal market
conditions, at least 65% of the funds' total assets will be invested in
securities of issuers located in at least three different countries (other than
the United States). Additionally, at least 65% of the funds' total assets will
normally be invested in common and preferred stocks, and warrants to acquire
such stocks. Each fund may also engage in hedging strategies such as options,
futures and forward currency contracts, to attempt to reduce the overall risk of
its investment portfolio, enhance income, realize gains or manage the fund's
foreign currency exposure.
Govett International Equity Fund/ARK International Equity Selection
Portfolio. The investment objectives and policies of Govett International
Equity Fund and the proposed revised investment objectives and policies of ARK
International Equity Selection Portfolio (or, alternatively, ARK International
Equity Portfolio) are identical. Both funds have an investment objective of
long-term capital appreciation. They seek to achieve their investment objective
by investing primarily in equity securities of non-U.S. issuers. Under normal
market conditions, the funds will invest at least 65% of their total assets in
issuers located in not less than three different countries (other than the
United States). In addition, the funds will normally invest at least 65% of
their total assets in common and preferred stocks, and warrants to acquire such
stocks. Both funds may invest in debt obligations convertible into equity
securities, and in non-convertible debt securities when their advisors believe
these non-convertible securities present favorable opportunities for capital
appreciation. Each fund may also engage in hedging strategies such as options,
futures and forward currency contracts, to attempt to reduce the overall risk of
its investment portfolio, enhance income, realize gains or manage the fund's
foreign currency exposure.
Govett Global Income Fund/ARK Income Portfolio. The investment objectives
of Govett Global Income Fund and ARK Income Portfolio are similar. The primary
investment objective of Govett Global Income Fund is to provide high current
income as is consistent with the preservation of capital, while its secondary
objective is capital appreciation. ARK Income Portfolio's primary investment
objective is current income, while its secondary objective is capital growth.
The Govett Global Income Fund seeks to achieve its investment objectives by
investing primarily in debt securities. Under normal circumstances, the Govett
Global Income Fund invests at least 65% of its total assets in debt securities
of issuers located in at least three different countries, which may include the
United States. The Govett Global Income Fund may not invest more than 40% of its
total assets in any one country, other than the United States. The ARK Income
Portfolio seeks its investment objective by investing primarily in U.S.
investment-grade corporate and government fixed income securities (including
convertible and mortgage-backed securities) and unrated securities determined by
the advisor to be of comparable quality. Under normal circumstances, at least
65% of the value of the ARK Income Portfolio's total assets will be invested in
fixed income securities. The ARK Income Portfolio may also invest up to 15% of
its total assets in securities rated below investment-grade ("junk bonds").
The primary differences in the funds' investment polices are the types and
the credit quality of debt securities in which the funds invest. While Govett
Global Income Fund invests primarily in U.S. and foreign government debt
securities, the ARK Income Portfolio primarily invests in U.S. corporate and
government fixed income securities. Govett Global Income Fund's investment
policies require that it normally invest 75%
2
<PAGE> 12
of its total assets in investment-grade debt securities and commercial paper.
The ARK Income Portfolio's investment policies also require that it invest
primarily in investment-grade fixed income securities. ARK Income Portfolio,
however, may invest a greater percentage of its assets in non-investment grade
securities.
Govett Smaller Companies Fund/ARK Small-Cap Equity Portfolio. The
investment objective of Govett Smaller Companies Fund is long-term capital
appreciation by investing primarily in equity securities of smaller companies.
The investment objective of ARK Small-Cap Equity Portfolio is long-term capital
appreciation. It seeks to achieve its investment objective by investing
primarily in the common stock and other equity securities of
small-capitalization U.S. issuers. Under normal circumstances, the Govett
Smaller Companies Fund will invest at least 65% of its total assets in common
stock and other equity securities of smaller companies. For this fund, a smaller
company is a company with a market capitalization no greater than $3 billion
when the fund makes the initial investment. Under normal circumstances, at least
65% of the value of the ARK Small-Cap Equity Portfolio's total assets will be
invested in equity securities of companies with a market capitalization of $2
billion or less at the time of investment.
The primary differences in the funds' investment policies are the type and
size of the companies in which they invest. While the Govett Smaller Companies
Fund invests in both foreign and U.S. issuers, the ARK Small-Cap Equity
Portfolio invests primarily in U.S. companies. In addition, Govett Smaller
Companies Fund invests in companies with market capitalizations up to $3
billion, whereas the ARK Small-Cap Equity Portfolio invests in companies with
market capitalizations up to $2 billion. Thus, the market capitalizations of the
companies in which the ARK Small-Cap Equity Portfolio invests may be somewhat
smaller.
Additional Information. See Appendix B for more information regarding the
investment practices of the Acquired Funds and the Acquiring Funds. For a more
complete description of the investment objectives and policies of the Acquired
Funds and the Acquiring Funds, see the Prospectus and Annual Report of Govett
Funds and the Prospectus, Annual Report and Semi-Annual Report of ARK Funds,
which are incorporated herein by reference. The Prospectus, Annual Report, and
Semi-Annual Report of the ARK Funds are furnished with this Prospectus/Proxy
Statement.
Management and Arrangements with Service Providers
Responsibility for the management and supervision of Govett Funds and the
Acquired Funds rests with the Govett Funds' Board of Directors. The investment
manager to the Acquired Funds is AIB Govett, Inc. ("AIB Govett") and their
subadvisor is AIB Govett Asset Management Limited ("AIB Govett London"). Chase
Global Funds Services Company provides administrative services. FPS Broker
Services, Inc. is the distributor and principal underwriter for shares of the
Acquired Funds. The Chase Manhattan Bank serves as the global custodian.
Additional services are provided to the Acquired Funds by FPS Services, Inc.
Responsibility for the management and supervision of ARK Funds and the
Acquiring Funds rests with the ARK Funds' Board of Trustees. The investment
advisor to the Acquiring Funds is Allied Investment Advisors, Inc. ("AIA"). AIB
Govett will perform subadvisory services for the ARK International Equity
Selection Portfolio (or ARK International Equity Portfolio) and ARK Emerging
Markets Portfolio. SEI Investments Distribution Co. serves as the distributor of
the shares of the Acquiring Funds. Administrative services are provided by SEI
Investments Mutual Funds Services. Allfirst Trust Company, National Association,
serves as custodian for the securities and cash of the Acquiring Funds, and
Bankers Trust provides custodial services for foreign securities. SEI
Investments Distribution Co. serves as the distributor and principal underwriter
of the ARK Funds' shares. Retail Class A shares of the Acquiring Funds are
subject to a distribution and shareholder services plan. The Acquiring Funds'
Institutional Class shares are subject to a shareholder services plan.
See Appendix C for more information regarding arrangements with service
providers of the Acquired Funds and the Acquiring Funds.
3
<PAGE> 13
Comparative Fee Tables
The tables set forth below show (a) shareholder fees and annual operating
expenses for each Acquired Fund for the fiscal year ended December 31, 1999 and
for each Acquiring Fund as of April 30, 1999 for its fiscal year ended on such
date, in each case restated to reflect expenses the Acquired Funds and the
Acquiring Funds, respectively, expect to incur during the current fiscal year,
and (b) estimated (combined) information for each Acquiring Fund assuming the
reorganization of such Acquiring Fund had taken place on October 31, 1999.
Annual operating expenses as of December 31, 1999 for the Class A Retail
and Institutional Class of the Acquired Funds and for the Retail Class A and
Institutional Class of the Acquiring Funds are based on (a) operating expense
information, adjusted for estimated class specific expenses, in each case
restated to reflect expenses the Acquiring Fund expects to incur during the
current fiscal year, and (b) estimated (combined) information for the Acquiring
Fund assuming the reorganization had taken place on October 31, 1999.
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
----------------------------------- -----------------------------------
ESTIMATED ESTIMATED
GOVETT (COMBINED) GOVETT (COMBINED)
GLOBAL ARK ARK GLOBAL ARK ARK
INCOME INCOME INCOME INCOME INCOME INCOME
FUND PORTFOLIO PORTFOLIO FUND PORTFOLIO PORTFOLIO
------ --------- ---------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum sales load imposed on
purchases and reinvested
dividends.................... None 4.50% 4.50% None None None
Deferred sales charges imposed
on redemptions............... None None None None None None
Redemption Fee................. 1.00%(1) None(2) None(2) 1.00%(1) None(2) None(2)
Exchange Fee................... 1.00%(1) None None 1.00%(1) None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage of
average net assets)
Management Fees................ 0.75% 0.60% 0.60% 0.75% 0.60% 0.60%
Distribution (12b-1) Fees...... 0.35% 0.30% 0.30% None None None
Other Expenses................. 3.41% 0.35% 0.35% 3.41% 0.35% 0.35%
---- ---- ---- ---- ---- ----
Total Annual Portfolio
Operating Expenses........... 4.51%(3) 1.25% 1.25% 4.16%(3) 0.95% 0.95%
Fee Waiver and Expense
Reimbursement................ (2.16)% (0.20)% (0.20)% (2.16)% (0.09)% (0.09)%
---- ---- ---- ---- ---- ----
Net Operating Expenses......... 2.35%(4) 1.05%(5) 1.05%(5) 2.00%(4) 0.86%(5) 0.86%(5)
</TABLE>
---------------
(1) Class A Retail and Institutional Class shares purchased after September 30,
1998 are subject to a redemption fee of 1% on shares sold within six months
of purchase, and shares of either class purchased after December 31, 1998
are subject to an exchange fee of 1% on shares exchanged within six months
of purchase.
(2) If redemption proceeds are wired to a bank account, a $10 fee is applicable.
(3) The figures presented in this table are based on the gross expenses incurred
by Class A Retail shares of the fund during the year ended December 31,
1999.
(4) During 1999, the investment manager paid or reimbursed the fund for certain
operating expenses. The actual total operating expenses paid by the fund
with respect to Class A Retail shares for 1999 were 1.75% of average daily
net assets. The Institutional Class shares had not been sold to the public
as of December 31, 1999. For the 2000 fiscal year, the investment manager
has agreed to pay and reimburse certain operating expenses to limit total
annual operating expenses to 2.35% of average daily net assets for Class A
Retail shares and to 2.00% of average daily net assets for Institutional
Class shares.
4
<PAGE> 14
(5) The Portfolio's advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.05% for
Retail Class A and 0.86% for Institutional Class until August 31, 2001. The
Portfolio's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because, in addition to
its contractual commitment, the advisor is voluntarily reimbursing expenses
in order to keep total operating expenses at a specified level. The advisor
may discontinue all or part of these reimbursements at any time. With the
expense reimbursements, the Portfolio's actual total operating expenses are
as follows:
<TABLE>
<S> <C>
Income Portfolio -- Retail Class A.......................... 0.95%
Income Portfolio -- Institutional Class..................... 0.82%
</TABLE>
EXAMPLE
A shareholder would pay the following expenses on a $10,000 investment,
assuming a 5% annual return, reinvestment on all dividends and redemption of the
shares after the number of year indicated:
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
--------------------------------- ---------------------------------
ESTIMATED ESTIMATED
GOVETT (COMBINED) GOVETT (COMBINED)
GLOBAL ARK ARK GLOBAL ARK ARK
INCOME INCOME INCOME INCOME INCOME INCOME
FUND PORTFOLIO PORTFOLIO FUND PORTFOLIO PORTFOLIO
------ --------- ---------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
1 Year........................... $ 238 $ 552 $ 552 $ 203 $ 88 $ 88
3 Years.......................... $1,169 $ 810 $ 810 $1,067 $ 294 $ 294
5 Years.......................... $2,108 $1,087 $1,087 $1,946 $ 517 $ 517
10 Years......................... $4,498 $1,876 $1,876 $4,208 $1,158 $1,158
</TABLE>
The assumption in the example of a 5% annual return is required by the SEC
for all mutual funds, and is not a prediction of any fund's future performance.
In addition, this example assumes that the current agreements regarding fee
waivers and expense reimbursements will remain in effect only through the end of
the Fund's current fiscal year. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE> 15
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
------------------------------------- -------------------------------------
ESTIMATED ESTIMATED
GOVETT ARK (COMBINED) GOVETT ARK (COMBINED)
SMALLER SMALL-CAP ARK SMALL-CAP SMALLER SMALL-CAP ARK SMALL-CAP
COMPANIES EQUITY EQUITY COMPANIES EQUITY EQUITY
FUND PORTFOLIO PORTFOLIO FUND PORTFOLIO PORTFOLIO
--------- --------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from
your investment)
Maximum sales load imposed
on purchases and
reinvested dividends.... None 4.75% 4.75% None None None
Deferred sales charges
imposed on
redemptions............. None None None None None None
Redemption Fee............ 1.00%(1) None(2) None(2) 1.00%(1) None(2) None(2)
Exchange Fee.............. 1.00%(1) None None 1.00%(1) None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage
of average net assets)
Management Fees........... 1.00% 0.80% 0.80% 1.00% 0.80% 0.80%
Distribution (12b-1)
Fees.................... 0.35% 0.40% 0.40% None None None
Other Expenses............ 1.81% 0.46% 0.46% 1.81% 0.46% 0.46%
---- ---- ---- ---- ---- ----
Total Annual Portfolio
Operating Expenses...... 3.16%(3) 1.66% 1.66% 2.81%(3) 1.26%(6) 1.26%(6)
Fee Waiver and Expense
Reimbursement........... (0.81)% (0.22)% (0.22)% (0.81)%
---- ---- ---- ----
Net Operating Expenses.... 2.35%(4) 1.44%(5) 1.44%(5) 2.00%(4)
</TABLE>
---------------
(1) Class A Retail and Institutional Class shares purchased after September 30,
1998 are subject to a redemption fee of 1% on shares sold within six months
of purchase, and shares of either class purchased after December 31, 1998
are subject to an exchange fee of 1% on shares exchanged within six months
of purchase.
(2) If redemption proceeds are wired to a bank account, a $10 fee is applicable.
(3) The figures presented in this table are based on the gross expenses incurred
by Class A Retail shares of the fund during the year ended December 31,
1999.
(4) During 1999, the investment manager paid or reimbursed the fund for certain
operating expenses. The actual total operating expenses paid by the fund
with respect to Class A Retail shares for 1999 were 2.35% of average daily
net assets. The Institutional Class shares had not been sold to the public
as of December 31, 1999. For the 2000 fiscal year, the investment manager
has agreed to pay and reimburse certain operating expenses to limit total
annual operating expenses to 2.35% of average daily net assets for Class A
Retail shares and to 2.00% of average daily net assets for Institutional
Class shares.
(5) The Portfolio's advisor has agreed contractually to waive fees and reimburse
expenses of the Retail Class A in order to keep total operating expenses
from exceeding 1.44% until August 31, 2001. The Retail Class A's total
actual annual operating expenses for the most recent fiscal year were less
than the amount shown above because, in addition to its contractual
commitment, the advisor is voluntarily reimbursing expenses in order to keep
total operating expenses at a specified level. The advisor may discontinue
all or part of these reimbursements at any time. With the expense
reimbursements, the Portfolio's actual total operating expenses are as
follows:
<TABLE>
<S> <C>
Small-Cap Equity Portfolio -- Retail Class A................ 1.30%
</TABLE>
(6) The Portfolio's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the advisor is
voluntarily waiving reimbursing expenses in order to keep total operating
expenses at a specified level. The advisor may discontinue all or part of
these reimbursements at any time. With the expense reimbursements, the
Portfolio's actual total operating expenses are as follows:
<TABLE>
<S> <C>
Small-Cap Equity Portfolio -- Institutional Class........... 1.19%
</TABLE>
6
<PAGE> 16
EXAMPLE
A shareholder would pay the following expenses on a $10,000 investment,
assuming a 5% annual return, reinvestment on all dividends and redemption of the
shares after the number of year indicated:
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
------------------------------------- -------------------------------------
ESTIMATED ESTIMATED
GOVETT ARK (COMBINED) GOVETT ARK (COMBINED)
SMALLER SMALL-CAP ARK SMALL-CAP SMALLER SMALL-CAP ARK SMALL-CAP
COMPANIES EQUITY EQUITY COMPANIES EQUITY EQUITY
FUND PORTFOLIO PORTFOLIO FUND PORTFOLIO PORTFOLIO
--------- --------- ------------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 Year..................... $ 238 $ 615 $ 615 $ 203 $ 128 $ 128
3 Years.................... $ 899 $ 953 $ 953 $ 795 $ 400 $ 400
5 Years.................... $1,584 $1,315 $1,315 $1,412 $ 692 $ 692
10 Years................... $3,411 $2,329 $2,329 $3,079 $1,523 $1,523
</TABLE>
The assumption in the example of a 5% annual return is required by the SEC
for all mutual funds, and is not a prediction of any fund's future performance.
In addition, this example assumes that the current agreements regarding fee
waivers and expense reimbursements will remain in effect only through the end of
the Fund's current fiscal year. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
-------------------------------------- --------------------------------------
ESTIMATED ESTIMATED
GOVETT (COMBINED) ARK (COMBINED)
EMERGING ARK EMERGING ARK EMERGING GOVETT EMERGING ARK EMERGING
MARKETS MARKETS MARKETS EMERGING MARKETS MARKETS
EQUITY EQUITY EQUITY MARKETS EQUITY EQUITY
FUND PORTFOLIO PORTFOLIO EQUITY FUND PORTFOLIO PORTFOLIO
-------- ------------ ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from
your investment)
Maximum sales load imposed
on purchases and
reinvested dividends.... None 4.75% 4.75% None None None
Deferred sales charges
imposed on
redemptions............. None None None None None None
Redemption Fee............ 1.00%(1) None(2) None(2) 1.00%(1) None(2) None(2)
Exchange Fee.............. 1.00%(1) None None 1.00%(1) None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage
of average net assets)
Management Fees........... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution (12b-1)
Fees.................... 0.35% 0.40% 0.40% None None None
Other Expenses............ 2.96% 1.00%(5) 1.00%(5) 2.96% 1.00%(5) 1.00%(5)
----- ----- ----- ----- ----- -----
Total Annual Portfolio
Operating Expenses...... 4.31%(3) 2.40% 2.40% 3.96%(3) 2.00%(7) 2.00%(7)
Fee Waiver and Expense
Reimbursement........... (2.46)% (0.30)% (0.30)% (2.46)%
----- ----- ----- -----
Net Operating Expenses.... 1.85%(4) 2.10%(6) 2.10%(6) 1.50%(4)
</TABLE>
---------------
(1) Class A Retail and Institutional Class shares purchased after September 30,
1998 are subject to a redemption fee of 1% on shares sold within six months
of purchase, and shares of either class purchased after December 31, 1998
are subject to an exchange fee of 1% on shares exchanged within six months
of purchase.
(2) If redemption proceeds are wired to a bank account, a $10 fee is applicable.
(3) The figures presented in this table are based on the gross expenses incurred
by Class A Retail shares of the fund during the year ended December 31,
1999.
(4) During 1999, the investment manager paid or reimbursed the fund for certain
operating expenses. The actual total operating expenses paid by the fund
with respect to Class A Retail shares for 1999 were 1.85% of average daily
net assets. The Institutional Class shares had not been sold to the public
as of December 31, 1999. For the 2000 fiscal year, the investment manager
has agreed to pay and
7
<PAGE> 17
reimburse certain operating expenses to limit total annual operating
expenses to 1.85% of average daily net assets for Class A Retail shares and
to 1.50% of average daily net assets for Institutional Class shares.
(5) As of the date of this Proxy/Prospectus, the Portfolio has not yet commenced
operations and Other Expenses are based on estimates for the current fiscal
year.
(6) The Portfolio's Advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 2.10%
until August 31, 2001. In addition to its contractual waiver, the advisor is
also voluntarily waiving a portion of the fees in order to keep total
operating expenses at a specified level. The advisor may discontinue all or
part of these voluntary waivers at any time. With the voluntary fee waivers,
the Portfolio's actual total operating expenses are as follows:
<TABLE>
<S> <C>
Emerging Markets Equity Portfolio -- Retail Class A......... 2.08%
</TABLE>
(7) The Portfolio's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because the Advisor is
voluntarily waiving reimbursing expenses in order to keep total operating
expenses at a specified level. The Advisor may discontinue all or part of
these reimbursements at any time. With the expense reimbursements, the
Portfolio's actual total operating expenses are as follows:
<TABLE>
<S> <C>
Emerging Markets Equity Portfolio -- Institutional Class.... 1.98%
</TABLE>
EXAMPLE
A shareholder would pay the following expenses on a $10,000 investment,
assuming a 5% annual return, reinvestment on all dividends and redemption of the
shares after the number of year indicated:
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
---------------------------------------- ----------------------------------------
ESTIMATED ESTIMATED
GOVETT (COMBINED) ARK (COMBINED)
EMERGING ARK EMERGING ARK EMERGING GOVETT EMERGING ARK EMERGING
MARKETS MARKETS MARKETS EMERGING MARKETS MARKETS
EQUITY EQUITY EQUITY MARKETS EQUITY EQUITY
FUND PORTFOLIO PORTFOLIO EQUITY FUND PORTFOLIO PORTFOLIO
-------- ------------ ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
1 Year............... $ 188 $ 678 $ 678 $ 153 $ 203 $ 203
3 Years.............. $1,083 $1,161 $1,161 $ 981 $ 627 $ 627
5 Years.............. $1,991 $1,669 $1,669 $1,826 $1,078 $1,078
10 Years............. $4,316 $3,060 $3,060 $4,019 $2,327 $2,327
</TABLE>
The assumption in the example of a 5% annual return is required by the SEC
for all mutual funds, and is not a prediction of any fund's future performance.
In addition, this example assumes that the current agreements regarding fee
waivers and expense reimbursements will remain in effect only through the end of
the Fund's current fiscal year. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
8
<PAGE> 18
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
--------------------------------------------- ---------------------------------------------
ESTIMATED ESTIMATED
(COMBINED) (COMBINED)
ARK ARK ARK ARK
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GOVETT EQUITY EQUITY GOVETT EQUITY EQUITY
INTERNATIONAL SELECTION SELECTION INTERNATIONAL SELECTION SELECTION
EQUITY FUND PORTFOLIO PORTFOLIO EQUITY FUND PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from
your
investment)
Maximum sales load imposed
on purchases and
reinvested dividends..... None 1.50% 4.75% None None None
Deferred sales charges
imposed on redemptions... None None None None None None
Redemption Fee............. 1.00%(1) None(2) None(2) 1.00%(1) None(2) None(2)
Exchange Fee............... 1.00%(1) None None 1.00%(1) None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage
of average net assets)
Management Fees............ 1.00% 0.65% 1.00% 1.00% 0.65% 1.00%
Distribution (12b-1)
Fees..................... 0.35% 0.40% 0.40% None None None
Other Expenses............. 1.99% 0.40% 0.45% 1.98% 0.40% 0.45%
---- ---- ---- ---- ---- ----
Total Annual Portfolio
Operating Expenses....... 3.34%(3) 1.45% 1.85% 2.98%(3) 1.05% 1.45%
Fee Waiver and Expense
Reimbursement............ (0.99)% (0.31)% (0.35)% (0.98)% (0.08)% (0.05)%
---- ---- ---- ---- ---- ----
Net Operating Expenses..... 2.35%(4) 1.14%(5) 1.50%(6) 2.00%(4) 0.97%(5) 1.40%(6)
</TABLE>
---------------
(1) Class A Retail and Institutional Class shares purchased after September 30,
1998 are subject to a redemption fee of 1% on shares sold within six months
of purchase, and shares of either class purchased after December 31, 1998
are subject to an exchange fee of 1% on shares exchanged within six months
of purchase.
(2) If redemption proceeds are wired to a bank account, a $10 fee is applicable.
(3) The figures presented in this table are based on the gross expenses incurred
by Class A Retail shares of the fund during the year ended December 31,
1999.
(4) During 1999, the investment manager paid or reimbursed the fund for certain
operating expenses. The actual total operating expenses paid by the fund
with respect to Class A Retail shares for 1999 were 2.35% and 2.00% of
average daily net assets, respectively. For the 2000 fiscal year, the
investment manager has agreed to pay and reimburse certain operating
expenses to limit total annual operating expenses to 2.35% of average daily
net assets for Class A Retail shares and to 2.00% of average daily net
assets for Institutional Class shares.
(5) The Portfolio's Advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.14% for
Class A Shares and 0.97% for Institutional Class until August 31, 2001. The
Portfolio's total actual annual operating expenses for the most recent
fiscal year were less than the amount shown above because, in addition to
its contractual waiver, the Advisor is voluntarily waiving a portion of the
fees in order to keep total operating expenses at a specified level. The
Advisor may discontinue all or part of these voluntary waivers at any time.
With the voluntary fee waivers, the Portfolio's actual total operating
expenses are as follows:
<TABLE>
<S> <C>
International Equity Selection Portfolio -- Class A
Shares.................................................... 1.04%
International Equity Selection Portfolio -- Institutional
Class..................................................... 0.93%
</TABLE>
(6) If the changes to the Portfolio's investment objectives and policies are
approved by the shareholders and implemented, the Portfolio's advisor has
agreed contractually to waive fees and reimburse expenses in order to keep
total operating expenses from exceeding 1.50% for Retail Class A and 1.40%
for Institutional Class until August 31, 2001.
9
<PAGE> 19
EXAMPLE
A shareholder would pay the following expenses on a $10,000 investment,
assuming a 5% annual return, reinvestment on all dividends and redemption of the
shares after the number of year indicated:
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
--------------------------------------------- ---------------------------------------------
ESTIMATED ESTIMATED
(COMBINED) (COMBINED)
ARK ARK ARK ARK
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GOVETT EQUITY EQUITY GOVETT EQUITY EQUITY
INTERNATIONAL SELECTION SELECTION INTERNATIONAL SELECTION SELECTION
EQUITY FUND PORTFOLIO PORTFOLIO EQUITY FUND PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 Year..................... $ 238 $ 264 $ 620 $ 203 $ 99 $ 143
3 Years.................... $ 935 $ 572 $ 997 $ 829 $ 326 $ 454
5 Years.................... $1,656 $ 901 $1,397 $1,481 $ 572 $ 787
10 Years................... $3,564 $1,833 $2,514 $3,230 $1,275 $1,731
</TABLE>
The assumption in the example of a 5% annual return is required by the SEC
for all mutual funds, and is not a prediction of any fund's future performance.
In addition, this example assumes that the current agreements regarding fee
waivers and expense reimbursements will remain in effect only through the end of
the Fund's current fiscal year. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
--------------------------------------------- ---------------------------------------------
ESTIMATED ESTIMATED
(COMBINED) (COMBINED)
ARK ARK ARK ARK
GOVETT INTERNATIONAL INTERNATIONAL GOVETT INTERNATIONAL INTERNATIONAL
INTERNATIONAL EQUITY EQUITY INTERNATIONAL EQUITY EQUITY
EQUITY FUND PORTFOLIO PORTFOLIO EQUITY FUND PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER FEES
(fees paid directly from your
investment)
Maximum sales load imposed on
purchases and reinvested
dividends..................... None 4.75% 4.75% None None None
Deferred sales charges imposed
on redemptions................ None None None None None None
Redemption Fee.................. 1.00%(1) None(2) None(2) 1.00%(1) None(2) None(2)
Exchange Fee.................... 1.00%(1) None None 1.00%(1) None None
ANNUAL OPERATING EXPENSES
(expressed as a percentage of
average net assets)
Management Fees................. 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Distribution (12b-1) Fees....... 0.35% 0.40% 0.40% None None None
Other Expenses.................. 1.99% 0.75%(5) 0.75%(5) 1.98% 0.75%(5) 0.75%(5)
---- ---- ---- ---- ---- ----
Total Annual Portfolio Operating
Expenses...................... 3.34%(3) 2.15% 2.15% 2.98%(3) 1.75% 1.75%
Fee Waiver and Expense
Reimbursement................. (0.99)% (0.55)% (0.55)% (0.98)% (0.25)% (0.25)%
---- ---- ---- ---- ---- ----
Net Operating Expenses.......... 2.35%(4) 1.60%(6) 1.60%(6) 2.00%(4) 1.50%(6) 1.50%(6)
</TABLE>
---------------
(1) Class A Retail and Institutional Class shares purchased after September 30,
1998 are subject to a redemption fee of 1% on shares sold within six months
of purchase, and shares of either class purchased after December 31, 1998
are subject to an exchange fee of 1% on shares exchanged within six months
of purchase.
(2) If redemption proceeds are wired to a bank account, a $10 fee is applicable.
(3) The figures presented in this table are based on the gross expenses incurred
by Class A Retail shares of the fund during the year ended December 31,
1999.
10
<PAGE> 20
(4) During 1999, the investment manager paid or reimbursed the fund for certain
operating expenses. The actual total operating expenses paid by the fund
with respect to Class A Retail shares for 1999 were 2.35% and 2.00% of
average daily net assets, respectively. For the 2000 fiscal year, the
investment manager has agreed to pay and reimburse certain operating
expenses to limit total annual operating expenses to 2.35% of average daily
net assets for Class A Retail shares and to 2.00% of average daily net
assets for Institutional Class shares.
(5) As of the date of this Prospectus/Proxy Statement, the Portfolio has not yet
commenced operations and Other Expenses are based on estimates for the
current fiscal year.
(6) The Portfolio's advisor has agreed contractually to waive fees and reimburse
expenses in order to keep total operating expenses from exceeding 1.60% for
Retail Class A and 1.50% for Institutional Class until August 31, 2001.
EXAMPLE
A shareholder would pay the following expenses on a $10,000 investment,
assuming a 5% annual return, reinvestment on all dividends and redemption of the
shares after the number of year indicated:
<TABLE>
<CAPTION>
RETAIL CLASS INSTITUTIONAL CLASS
--------------------------------------------- ---------------------------------------------
ESTIMATED ESTIMATED
(COMBINED) (COMBINED)
ARK ARK ARK ARK
GOVETT INTERNATIONAL INTERNATIONAL GOVETT INTERNATIONAL INTERNATIONAL
INTERNATIONAL EQUITY EQUITY INTERNATIONAL EQUITY EQUITY
EQUITY FUND PORTFOLIO PORTFOLIO EQUITY FUND PORTFOLIO PORTFOLIO
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1 Year..................... $ 238 $ 630 $ 630 $ 203 $ 153 $ 153
3 Years.................... $ 935 $1,066 $1,066 $ 829 $ 527 $ 527
5 Years.................... $1,656 $1,526 $1,526 $1,481 $ 926 $ 926
10 Years................... $3,564 $2,799 $2,799 $3,230 $2,042 $2,042
</TABLE>
The assumption in the example of a 5% annual return is required by the SEC
for all mutual funds, and is not a prediction of any fund's future performance.
In addition, this example assumes that the current agreements regarding fee
waivers and expense reimbursements will remain in effect only through the end of
the Fund's current fiscal year. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
11
<PAGE> 21
Purchases
Class A Retail shares of the Acquired Funds may be sold to any interested
party who meets the investment minimum. Institutional Class shares of the
Acquired Funds may be sold only to certain eligible investors. Class A Retail
shares and Institutional Class shares may be purchased at their net asset value
without a sales charge determined as of the close of the regular trading session
of the New York Stock Exchange (normally 4:00 p.m. Eastern Time). Share
purchases may be made Monday through Friday, except on certain holidays. The
following minimum investments apply to Class A Retail shares or Institutional
Class shares of the Acquired Funds unless they are waived:
<TABLE>
<CAPTION>
CLASS A RETAIL
-------------------------------------------------
FIRST STAGE SECOND STAGE
SHAREHOLDERS (YOU SHAREHOLDERS (YOU
BECAME, AND REMAIN, BECAME, AND REMAIN, A
A SHAREHOLDER PRIOR TO SHAREHOLDER ON OR AFTER
JANUARY 1, 1998) JANUARY 1, 1998) INSTITUTIONAL CLASS
---------------------- ----------------------- -------------------
<S> <C> <C> <C>
To open a regular account............. $500 $5,000 $25,000
To add to a regular account........... $ 25 $1,000 $ 0
To open an IRA account................ $500 $2,000 N/A
To add to an IRA account.............. $ 25 $1,000 N/A
Minimum account balance............... $500 $ 500 $ 0
</TABLE>
Shares of the Acquiring Funds are sold on a continuous basis at net asset
value plus any applicable sales charge. Retail Class A shares are sold through
qualified securities brokers and other financial institutions. The maximum sales
charge applicable to the Retail Class A of the Acquiring Funds is 4.75%, except
the ARK Income Portfolio which is 4.50%. Institutional Class shares of the
Acquiring Funds are sold to individuals, institutions and other entities that
have established trust, custodial or money management relationships with
Allfirst Bank ("Allfirst") or its affiliates. Institutional Class shares may be
purchased by eligible investors at their net asset value without a sales charge.
Purchases may be made Monday through Friday, except on certain holidays. The net
asset value of the Acquiring Funds is calculated as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time).
Shareholders of the Acquiring Funds may reinvest their dividends in Retail Class
A or Institutional Class shares, as applicable, of the Acquiring Funds but
additional purchases of shares may only be made by Acquiring Fund shareholders
who are otherwise eligible to purchase shares of that particular class. The
following minimum investments apply to purchases of shares of the Acquiring
Funds unless they are waived:
<TABLE>
<CAPTION>
RETAIL CLASS A INSTITUTIONAL CLASS
-------------- -------------------
<S> <C> <C>
To open an account.......................................... $500 $100,000
To add to an account........................................ $500 N/A
Minimum account balance..................................... $500 $250,000*
</TABLE>
---------------
* An Institutional Class shareholder of the Acquiring Fund must, within six
months, reach and maintain an aggregate balance of $250,000.
Exchanges
After the reorganizations, former shareholders of the Acquired Funds will
have the same exchange rights as holders of shares of the same class of the
Acquiring Funds. Shares of the Acquiring Funds may be exchanged on any business
day at their net asset value, plus any sales charge differential, for shares of
the same class of one or more of the other ARK Funds. Shares of the Acquired
Funds may also be exchanged at their net asset value, plus any sales charge
differential, for the shares of the same class of the other Govett Funds and the
Kemper Money Market Fund. The primary differences in the exchange rights of the
Acquired and Acquiring Fund shareholders are the number of fund portfolios into
which Acquired Fund shareholders may exchange their shares. Class A Retail and
Institutional Class shares of the Acquired Funds purchased after December 31,
1998 are subject to an exchange fee of 1% on shares exchanged within six months
of
12
<PAGE> 22
purchase; the Acquiring Funds do not have any exchange fees. In addition,
Acquired Fund shareholders have a smaller number of fund portfolios into which
they may exchange their shares as compared to the number of portfolios available
to Acquiring Fund shareholders.
Dividends and Distributions
The Acquired and Acquiring Funds each declare and pay dividends from net
investment income and net realized capital gains, if any, annually, except the
Govett Global Income Fund and ARK Income Portfolio, which declare income
dividends daily and pay them monthly. Distributions may include all or a portion
of the fund's net realized short-term gains. At least annually, distributions of
any net realized or remaining gains will be declared.
The primary difference between the Acquired and Acquiring Funds is the
automatic reinvestment of dividends. Holders of shares of the Acquired Fund may
elect to have their dividends and distributions automatically reinvested in
additional shares of the same class, to receive their dividends and
distributions in cash, or to receive a combination of additional shares and
cash. If a shareholder fails to select an option, all dividends and
distributions are reinvested in additional shares. For the Acquiring Funds,
dividends and distributions are automatically reinvested in additional shares,
unless cash payments are requested in writing.
Redemption Procedures
Shares of the Acquired and Acquiring Funds are redeemable on any business
day at a price equal to the net asset value of the shares the next time it is
calculated after receipt of a redemption request in good order. The primary
difference in the redemption procedures of the Acquired and Acquiring Funds is
that Class A Retail and Institutional Class shares of the Acquired Funds
purchased after September 30, 1998 are subject to a 1% redemption fee on shares
sold within six months of purchase. The Acquiring Funds do not have any
redemption fees.
VOTING INFORMATION. This Prospectus/Proxy Statement is being furnished in
connection with the solicitation of proxies by the Board of Directors of Govett
Funds in connection with the Meeting. Only shareholders of record at the close
of business on May 18, 2000 will be entitled to notice of and to vote at the
Meeting. Each share or fraction thereof is entitled to one vote or fraction
thereof. Shares represented by a properly executed proxy will be voted in
accordance with the instructions thereon, or if no instruction is given, the
persons named as proxies will vote in favor of each proposal set forth in the
Notice of Meeting. Proxies may be revoked at any time before they are exercised
by submitting a written notice of revocation or a subsequently executed proxy,
or by attending the Meeting and voting in person. For additional information,
including a description of the shareholder vote required for approval of the
reorganizations, see "Information Relating to Voting Matters."
13
<PAGE> 23
RISK FACTORS
The following discussion summarizes some of the more significant risk
factors relating to the Acquired Funds and corresponding Acquiring Funds and is
qualified by reference to the more complete information about each fund
contained in the Prospectuses and Statements of Additional Information of Govett
Funds and ARK Funds. See Appendix D for more information concerning risk.
ARK INCOME PORTFOLIO/GOVETT GLOBAL INCOME FUND. Govett Global Income Fund will
merge into ARK Income Portfolio. The following discussion summarizes the risks
for each fund.
RISKS COMMON TO BOTH FUNDS
Fixed Income Risk. The prices of the funds' fixed income securities
respond to economic developments, particularly interest rate changes, as well as
to perceptions about the creditworthiness of individual issuers. Generally, the
funds' fixed income securities will decrease in value if interest rates rise.
The volatility of lower rated securities is even greater than that of higher
rated securities. Also, securities with longer maturities are generally more
volatile, so the average maturity of the funds' securities affects risk.
Credit Risk. Junk bonds involve greater risks of default or downgrade and
are more volatile than investment-grade securities. Junk bonds involve a greater
risk of price declines than investment-grade securities due to actual or
perceived changes in an issuer's creditworthiness. In addition, issuers of junk
bonds may be more susceptible than other issuers to economic downturns. Junk
bonds are subject to the risk that the issuer may not be able to pay interest
and ultimately to repay principal upon maturity. Discontinuation of these
payments could substantially adversely affect the market value of the security.
Foreign Securities and Currency Risk. Investments in foreign markets
expose the funds' investments to additional risks including the following:
- Political instability
- Significant or rapid changes in currency exchange rates
- Foreign exchange restrictions
- Inaccurate or incomplete financial information resulting from less strict
securities market regulations and accounting standards
The funds may invest in emerging markets, and these risks are increased to
the extent they do so.
RISKS ASSOCIATED WITH ARK INCOME PORTFOLIO
Mortgage-Backed Securities Risk. The mortgages underlying mortgage-backed
securities may be paid off early, which makes it difficult to determine their
actual maturity and therefore calculate how the securities will respond to
changes in interest rates. The Portfolio may have to reinvest prepaid amounts at
lower interest rates. This risk of prepayment is an additional risk of
mortgage-backed securities.
The Portfolio's U.S. government securities are not guaranteed against price
movements due to changing interest rates. Obligations issued by some U.S.
government agencies are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources.
RISKS ASSOCIATED WITH GOVETT GLOBAL INCOME FUND
Diversification Risk. Govett Global Income Fund is not a "diversified
company" as defined in the Investment Company Act of 1940. As a result, this
fund may invest in a smaller number of issuers than diversified mutual funds,
which exposes it to a greater risk of loss from its investments in any one
company.
PRIMARY DIFFERENCES IN INVESTMENT RISK OF THE FUNDS
ARK Income Portfolio and Govett Global Income Fund are subject to
substantially the same investment risks arising out of investing in debt
securities. However, Govett Global Income Fund is subject to additional
14
<PAGE> 24
risks of non-diversification and investment in foreign securities. Under its
investment policies, the ARK Income Portfolio is a diversified company and
invests to a lesser extent in foreign securities. However, ARK Income Portfolio
may invest a greater percentage of its assets in non-investment grade
securities.
ARK SMALL-CAP EQUITY PORTFOLIO/GOVETT SMALLER COMPANIES FUND. Govett Smaller
Companies Fund will merge into ARK Small-Cap Equity Portfolio. The following
discussion summarizes the risks for each fund.
RISKS COMMON TO BOTH FUNDS
Equity Risk. Since they purchase equity securities, the funds are subject
to the risk that stock prices will fall over short or extended periods of time.
Historically, the equity markets have moved in cycles, and the value of the
funds' equity securities may fluctuate significantly from day to day. Individual
companies may report poor results or be negatively affected by industry and/or
economic trends and developments. The prices of securities issued by such
companies may suffer a decline in response. These factors contribute to price
volatility, which is the principal risk of investing in the funds.
Small-Cap Risk. The smaller capitalization companies the funds invest in
may be more vulnerable to adverse business or economic events than larger, more
established companies. In particular, these small companies may have limited
product lines, markets and financial resources, and may depend upon a relatively
small management group. Therefore, small-cap stocks may be more volatile than
those of larger companies. These securities may be traded over-the-counter or
listed on an exchange and may or may not pay dividends.
Credit Risk. Junk bonds involve greater risks of default or downgrade and
are more volatile than investment-grade securities. Junk bonds involve a greater
risk of price declines than investment-grade securities due to actual or
perceived changes in an issuer's creditworthiness. In addition, issuers of junk
bonds may be more susceptible than other issuers to economic downturns. Junk
bonds are subject to the risk that the issuer may not be able to pay interest
and ultimately to repay principal upon maturity. Discontinuation of these
payments could substantially adversely affect the market value of the security.
Foreign Securities Risk. Investments in foreign markets expose the funds'
investments to additional risks including the following:
- Political instability
- Significant or rapid changes in currency exchange rates
- Foreign exchange restrictions
- Inaccurate or incomplete financial information resulting from less strict
securities market regulations and accounting standards
The funds may invest in emerging markets, and these risks are increased to
the extent they do so.
PRIMARY DIFFERENCES IN INVESTMENT RISK OF THE FUNDS
ARK Small-Cap Equity Portfolio and Govett Smaller Companies Fund are
subject to substantially the same investment risks arising out of investing in
companies with small market capitalizations. ARK Small-Cap Equity Portfolio is
subject to additional risks arising out of its smaller capitalization focus and
investments in junk bonds. ARK Small-Cap Equity Portfolio invests in companies
with market capitalizations of $2 billion or less. By contrast, Govett Smaller
Companies may invest in securities of issuers with market capitalizations up to
$3 billion. Thus, ARK Small-Cap Equity Portfolio may be subject to greater
volatility than the Govett Smaller Companies Fund since the market
capitalizations of the companies in which it invests may be smaller.
ARK EMERGING MARKETS EQUITY PORTFOLIO/GOVETT EMERGING MARKETS EQUITY
FUND. Govett Emerging Markets Equity Fund will merge into ARK Emerging Markets
Equity Portfolio. There are no significant differences in the investment risk of
the funds. The following discussion summarizes the risks for each fund.
15
<PAGE> 25
RISKS COMMON TO BOTH FUNDS
Equity Risk. Since they purchase equity securities, the funds are subject
to the risk that stock prices will fall over short or extended periods of time.
Historically, the equity markets have moved in cycles, and the value of the
funds' equity securities may fluctuate significantly from day to day. Individual
companies may report poor results or be negatively affected by industry and/or
economic trends and developments. The prices of securities issued by such
companies may suffer a decline in response. These factors contribute to price
volatility, which is the principal risk of investing in the funds.
Foreign Securities Risk. Investments in foreign markets expose the funds'
investments to additional risks including the following:
- Political instability
- Significant or rapid changes in currency exchange rates
- Foreign exchange restrictions
- Inaccurate or incomplete financial information resulting from less strict
securities market regulations and accounting standards
The funds may invest in emerging markets, and these risks are increased to
the extent they do so.
Small-Cap Risk. Securities of smaller companies tend to experience more
price volatility than securities of larger companies. Generally, smaller
companies have more limited product lines and markets than larger companies. On
the other hand, larger companies generally do not offer the potential for
capital appreciation, as do well-managed smaller companies.
ARK INTERNATIONAL EQUITY SELECTION PORTFOLIO (OR ARK INTERNATIONAL EQUITY
PORTFOLIO)/GOVETT INTERNATIONAL EQUITY FUND. Govett International Equity Fund
will merge into ARK International Equity Selection Portfolio (or ARK
International Equity Portfolio). There are no significant differences in the
investment risk of the funds. The following discussion summarizes the risks for
each fund.
Equity Risk. Since they purchase equity securities, the funds are subject
to the risk that stock prices will decline over short or extended periods of
time. Historically, the equity markets have moved in cycles, and the value of
the funds' equity securities may fluctuate significantly from day to day.
Individual companies may report poor results or be negatively affected by
industry and/or economic trends and developments. The prices of securities
issued by such companies may suffer a decline in response. These factors
contribute to price volatility, which is the principal risk of investing in the
funds.
Foreign Securities Risk. Investments in foreign markets expose the funds'
investments to additional risks including the following:
- Political instability
- Significant or rapid changes in currency exchange rates
- Foreign exchange restrictions
- Inaccurate or incomplete financial information resulting from less strict
securities market regulations and accounting standards
The funds may invest in emerging markets, and these risks are increased to
the extent they do so.
Small-Cap Risk. Securities of smaller companies tend to experience more
price volatility than securities of larger companies. Generally, smaller
companies have more limited product lines and markets than larger companies. On
the other hand, larger companies generally do not offer the potential for
capital appreciation, as do well-managed smaller companies.
16
<PAGE> 26
FINANCIAL HIGHLIGHTS
The Financial Highlights information for the Acquired and Acquiring Funds
is incorporated by reference to the May 1, 2000 Prospectus and the Annual Report
for the fiscal year ended December 31, 1999 of Govett Funds and the June 30,
2000 Prospectus and the Annual Report for the fiscal year ended April 30, 1999
and Semi-Annual Report for the six-months ended October 31, 1999 of ARK Funds,
which are available upon request, without charge, by calling Govett Funds at
1-800-821-0803 or ARK Funds at 1-888-4ARK-FUND. In addition, copies of the ARK
Funds Annual Report and Semi-Annual Report accompany this Prospectus/ Proxy
Statement.
INFORMATION RELATING TO THE PROPOSED REORGANIZATIONS
ARK Funds and Govett Funds have entered into a reorganization agreement
which provides that each Acquiring Fund is to acquire the corresponding Acquired
Fund. The reorganization agreement puts forth the terms and conditions that will
apply to the Acquired Funds reorganization into the Acquiring Funds. A copy of
the reorganization agreement is attached as Appendix A.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. The reorganization agreement
provides the details of the reorganizations. In essence, the reorganizations
will have two steps:
- First, if the shareholders of an Acquired Fund approve the
reorganization, the Acquired Fund will transfer substantially all of its
assets and liabilities to its corresponding Acquiring Fund. In exchange,
the Acquired Fund will receive shares of its corresponding Acquiring Fund
with a total value equal to the value of the assets it is transferring
(net of the Acquired Fund's liabilities).
- Second, the Acquired Fund will dissolve. Each Acquiring Fund will open an
account for each corresponding Acquired Fund's shareholder, and will
credit each shareholder with shares of the Acquiring Fund of the same
class and with the same total value as the Acquired Fund shares that the
shareholder owned on the date of the reorganization. New share
certificates will not be issued.
On or before the reorganization date, the Acquired Funds will distribute
all of their investment company taxable income earned, and all of their net
capital gains realized. On the day of the reorganization, Acquired Fund
shareholders will receive shares of the corresponding Acquiring Fund, of the
same class as their shares of the Acquired Fund and with the same total value as
their shares of the Acquired Fund. However, the number of shares the Acquired
Fund shareholders will receive, and the price per share, will be different,
depending on the net asset values per share of the funds on the reorganization
date.
Reorganization expenses will be paid by AIB Govett. The consummation of the
reorganizations is subject to certain conditions:
- Approval of the reorganization agreement by the shareholders of the
Acquired Funds*;
- Receipt of certain legal opinions described in the reorganization
agreement;
- Continuing accuracy of the representations and warranties in the
reorganization agreement;
- Performance in all material respects of the agreements in the
reorganization agreement.
ARK Funds and Govett Funds may mutually agree to terminate the
reorganization agreement at or prior to the reorganization date. Either ARK
Funds or Govett Funds may terminate the reorganization agreement at any time
after September 30, 2000 if the reorganizations have not occurred on or prior to
that date. In addition, either ARK Funds or Govett Funds may waive the other
party's breach of a provision or failure to satisfy a condition of the
reorganization agreement.
---------------
* The reorganization of the Govett International Equity Fund into the ARK
International Selection Portfolio will also be contingent upon the approval by
ARK shareholders and implementation of the proposed change in the investment
policy and related matters.
17
<PAGE> 27
BOARD CONSIDERATIONS. The Board of Directors of Govett Funds has
determined that the reorganizations are in the best interests of the Acquired
Funds and their shareholders and has approved the reorganization agreement. In
approving the reorganizations, the Board considered the following factors, among
others:
(a) more efficient operations due to combining the assets of the
Acquired Funds with the Acquiring Funds;
(b) the opportunity for the shareholders of each Acquired Fund to
participate in a larger family of mutual funds through the exchange
privilege offered by ARK Funds;
(c) the similarity of the investment objective and policies of each
Acquired Fund and the corresponding Acquiring Fund;
(d) the fact that the investment advisors of the Acquired Funds and
the Acquiring Funds are under common control and there would be a
continuation of several of the same personnel and resources;
(e) the fact that shareholder interests would not be diluted in the
proposed reorganizations; and
(f) the status of each reorganization as a tax-free reorganization.
After consideration of the factors and other relevant information, the
Board of Directors of Govett Funds unanimously approved the reorganization
agreement and directed that it be submitted to shareholders for approval. THE
BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE REORGANIZATION
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
At a meeting held on December 10, 1999, the Board of Directors of ARK Funds
approved the reorganization agreement, finding that the reorganizations are in
the best interests of the Acquiring Funds and their shareholders and that the
interests of the existing shareholders of the Acquiring Funds would not be
diluted as a result of the reorganizations.
CAPITALIZATION. Because the Acquired Funds will be combined in the
reorganizations with the Acquiring Funds, the total capitalization of the
Acquiring Funds after the reorganizations is expected to be greater than the
current capitalization of the Acquired Funds. The following table sets forth as
of October 31, 1999: (a) the capitalization of the Acquiring Funds and the
Acquired Funds, except for Govett Global Income Fund and ARK Income Portfolio
and (b) the estimated (combined) capitalization of the Acquiring Funds, with the
exception of ARK Income Portfolio, as adjusted to give effect to the
reorganizations. If consummated, the capitalization of the Acquiring Funds and
Acquired Funds is likely to be different at the reorganization date as a result
of daily share purchase and redemption activity.
<TABLE>
<CAPTION>
ESTIMATED (COMBINED)
GOVETT SMALLER ARK SMALL-CAP ARK SMALL-CAP
COMPANIES FUND EQUITY PORTFOLIO EQUITY PORTFOLIO
CLASS A RETAIL RETAIL CLASS A RETAIL CLASS A
-------------------- -------------------------- -----------------------------
<S> <C> <C> <C>
Total Net Assets............. $59,952,238 $ 3,608,980 $ 63,561,218
Shares Outstanding........... 2,646,172 189,198 3,331,349
Net Asset Value Per Share.... $ 22.66 $ 19.08 $ 19.08
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED (COMBINED)
GOVETT SMALLER ARK SMALL-CAP ARK SMALL-CAP
COMPANIES FUND EQUITY PORTFOLIO EQUITY PORTFOLIO
INSTITUTIONAL CLASS INSTITUTIONAL CLASS INSTITUTIONAL CLASS
-------------------- -------------------------- -----------------------------
<S> <C> <C> <C>
Total Net Assets............. N/A $ 46,509,716 $ 46,509,716
Shares Outstanding........... N/A 2,424,296 2,424,296
Net Asset Value Per Share.... N/A $ 19.19 $ 19.19
</TABLE>
18
<PAGE> 28
<TABLE>
<CAPTION>
GOVETT EMERGING ESTIMATED (COMBINED)
MARKETS ARK EMERGING MARKETS ARK EMERGING MARKETS
EQUITY FUND EQUITY PORTFOLIO(1) EQUITY PORTFOLIO
CLASS A RETAIL RETAIL CLASS A RETAIL CLASS A
-------------------- -------------------------- -----------------------------
<S> <C> <C> <C>
Total Net Assets............. $14,873,216 N/A $ 14,873,216
Shares Outstanding........... 1,429,346 N/A 1,429,346
Net Asset Value Per Share.... $ 10.41 N/A $ 10.41
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED (COMBINED)
GOVETT INTERNATIONAL ARK INTERNATIONAL ARK INTERNATIONAL
EQUITY FUND EQUITY SELECTION PORTFOLIO EQUITY SELECTION PORTFOLIO(2)
CLASS A RETAIL RETAIL CLASS A RETAIL CLASS A
-------------------- -------------------------- -----------------------------
<S> <C> <C> <C>
Total Net Assets............. $11,679,800 $ 1,995,966 $ 13,675,766
Shares Outstanding........... 943,538 160,234 1,097,618
Net Asset Value Per Share.... $ 12.38 $ 12.46 $ 12.46
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED (COMBINED)
GOVETT INTERNATIONAL ARK INTERNATIONAL ARK INTERNATIONAL
EQUITY FUND EQUITY SELECTION PORTFOLIO EQUITY SELECTION PORTFOLIO(3)
INSTITUTIONAL CLASS INSTITUTIONAL CLASS INSTITUTIONAL CLASS
-------------------- -------------------------- -----------------------------
<S> <C> <C> <C>
Total Net Assets............. $ 7,538,847 $ 28,028,545 $ 35,567,392
Shares Outstanding........... 606,543 2,249,641 2,854,685
Net Asset Value Per Share.... $ 12.43 $ 12.46 $ 12.46
</TABLE>
---------------
(1) The ARK Emerging Markets Equity Portfolio was created solely for purposes of
the reorganization.
(2) In the event that the Govett International Equity Fund is reorganized with
the ARK International Equity Portfolio (rather than the ARK International
Equity Selection Portfolio), the Estimated (Combined) Total Net Assets,
Shares Outstanding, and Net Asset Value Per Share for Retail Class A shares
would be $11,679,900, 943,546 and $12.38, respectively.
(3) In the event that the Govett International Equity Fund is reorganized with
the ARK International Equity Portfolio (rather than the ARK International
Equity Selection Portfolio), the Estimated (Combined) Total Net Assets,
Shares Outstanding, and Net Asset Value Per Share for Institutional Class
would be $7,538,947, 606,551 and $12.43, respectively.
The capitalization information for Govett Global Income Fund and ARK Income
Portfolio is set forth below as of June 15, 2000.
<TABLE>
<CAPTION>
GOVETT GLOBAL ARK INCOME ESTIMATED (COMBINED)
INCOME FUND PORTFOLIO ARK INCOME PORTFOLIO
CLASS A RETAIL RETAIL CLASS A RETAIL CLASS A
-------------------- -------------------------- -----------------------------
<S> <C> <C> <C>
Total Net Assets............. $3,547,482 $ 5,578,844 $ 9,126,326
Shares Outstanding........... 503,816 577,172 944,026
Net Asset Value Per Share.... $ 7.04 $ 9.67 $ 9.67
</TABLE>
<TABLE>
<CAPTION>
GOVETT GLOBAL ARK INCOME ESTIMATED (COMBINED)
INCOME FUND PORTFOLIO ARK INCOME PORTFOLIO
INSTITUTIONAL CLASS INSTITUTIONAL CLASS INSTITUTIONAL CLASS
-------------------- -------------------------- -----------------------------
<S> <C> <C> <C>
Total Net Assets............. N/A $355,232,955 $355,232,955
Shares Outstanding........... N/A 37,195,664 37,195,664
Net Asset Value Per Share.... N/A $ 9.55 $ 9.55
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES. Each reorganization of an Acquired Fund
into an Acquiring Fund will constitute a "reorganization" within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended ("Code"). The
reorganizations are not expected to have material federal income tax
consequences to the Acquired Funds, Acquiring Funds or their shareholders.
Following the reorganization, each Acquiring Fund will have the same
federal tax basis in the assets of the corresponding Acquired Fund that the
Acquired Fund had in those assets immediately prior to the
19
<PAGE> 29
reorganization. In addition, each shareholder of an Acquired Fund will have the
same federal tax basis in the shares of the Acquiring Fund received in the
reorganization that the shareholder had in his or her shares of the Acquired
Fund immediately prior to the reorganization. It is not expected that Acquired
Fund shareholders would incur any state or local taxes as a result of the
reorganizations, but Acquired Funds shareholders should consult their tax
advisors to make sure.
At December 31, 1999, Govett Emerging Markets Equity Fund, Govett Smaller
Companies Fund and Govett Global Income Fund had capital loss carry-forwards
available to offset future net capital gains of $12,933,321, $26,909,229, and
$4,656,156, respectively. The carry-forward period for capital losses is limited
to eight years, and various portions will expire through 2006 for Govett
Emerging Markets Equity Fund and Govett Smaller Companies Fund and 2007 for
Govett Global Income Fund unless used to offset realized capital gains. Under
the Code, ARK Small-Cap Equity Portfolio and ARK Income Portfolio will be able
to utilize in each taxable year only a portion of these capital loss
carry-forwards, limited generally to an amount equal to the fair market value of
the corresponding Acquired Fund on the closing date of the reorganization
multiplied by the long-term tax-exempt rate in effect at that time (currently
5.84%). The ARK Emerging Markets Equity Portfolio will not be so limited in its
utilization of the Govett Emerging Markets Equity Fund's capital loss
carry-forward. The limited ability of the ARK Small-Cap Equity Portfolio and ARK
Income Portfolio to utilize the full amount of the capital loss carry-forwards
may adversely affect Acquired Fund shareholders.
ARK Funds and Govett Funds have not sought a tax ruling from the Internal
Revenue Service (the "IRS"), but are acting in reliance upon the opinion of
counsel discussed above. The opinion of counsel is not binding on the IRS and
does not preclude the IRS from adopting a contrary position.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. The Board of Directors of Govett Funds, in connection
with the Meeting, is providing this Prospectus/Proxy Statement in connection
with the solicitation of proxies. Solicitation of proxies will occur principally
by mail, but officers and service contractors of Govett Funds may also solicit
proxies by telephone, telegraph, or personal interview. Any shareholder giving a
proxy may revoke it at any time before it is exercised by submitting to Govett
Funds a written notice of revocation or a subsequently executed proxy, or by
attending the Meeting and voting in person.
Only shareholders of the Acquired Funds of record at the close of business
on May 18, 2000 will be entitled to vote at the Meeting. On that date, there
were outstanding and entitled to be voted:
<TABLE>
<CAPTION>
CLASS A RETAIL INSTITUTIONAL CLASS
---------------- -------------------
<S> <C> <C>
Govett Global Income Fund........................ 506,050 Shares N/A
Govett Smaller Companies Fund.................... 2,304,814 Shares N/A
Govett Emerging Markets Equity Fund.............. 1,157,946 Shares N/A
Govett International Equity Fund................. 889,493 Shares 504,618 Shares
</TABLE>
Each share or fractional share is entitled to one vote or fraction thereof.
If the accompanying proxy is executed and returned in time for the Meeting,
the shares covered thereby will be voted in accordance with the proxy on all
matters that may properly come before the Meeting or any adjournment thereof.
For information on adjournments of the Meeting, see "Quorum" below.
SHAREHOLDER APPROVAL. The reorganization agreement and the transactions
contemplated by it are being submitted for approval at the Meeting in accordance
with the provisions of the charter and bylaws of Govett Funds. Under the
charter, the reorganizations must be approved by not less than a majority of the
total number of shares outstanding of the class or series of stock entitled to
vote thereon.
In tallying shareholder votes, abstentions and broker non-votes (i.e.,
proxies sent in by brokers and other nominees that cannot be voted on a proposal
because instructions have not been received from the beneficial owners) will be
counted in determining whether a quorum is present for purposes of convening the
Meeting.
20
<PAGE> 30
With respect to voting on the reorganizations, abstentions and broker non-votes
will have the same effect as votes cast against the proposal.
The vote of the shareholders of the Acquiring Funds regarding the
reorganizations is not being solicited because their approval or consent is not
necessary for the reorganizations to be consummated.
As of June 1, 2000, the following persons owned of record or beneficially
5% or more of the shares of the Acquired Funds:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OWNED
NAME AND ADDRESS OF SHAREHOLDER FUND SHARES BENEFICIALLY
------------------------------- ------------- --------- -------------
<S> <C> <C> <C>
Subramonian Shankar Govett 53,487 10.59%
5990 Neely Court Global
Norcross, GA 30092-1418 Income
Michael E. Pichichero Govett 47,419 6.10%
332 Landing Road S International
Rochester, NY 14610-3535 Equity
Light & Co Govett 441,381 31.74%
c/o Allfirst Trust Company NA International
Securities Processing 109-911 Equity
P.O. Box 1596
Baltimore, MD 21203-1596
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Under this definition, Light & Co. may be
deemed to be a controlling person of Govett International Equity Fund.
As of June 1, 2000, the directors and officers of Govett Funds, as a group,
owned less than 1% of the outstanding shares of each of the Acquired Funds.
Upon consummation of the reorganizations, the above-mentioned 5%
shareholders of the Acquired Funds will own the following percentage of shares
of the Acquiring Funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS OF SHAREHOLDER FUND OUTSTANDING SHARES
------------------------------- ------------- ------------------
<S> <C> <C>
Subramonian Shankar Govett 0.15%
5990 Neely Court Global Income
Norcross, GA 30092-1418
Michael E. Pichichero Govett 0.10%(1)
332 Landing Road S International
Rochester, NY 14610-3535 Equity
Light & Co Govett 0.90%(1)
c/o Allfirst Trust Company NA International
Securities Processing 109-911 Equity
P.O. Box 1596
Baltimore, MD 21203-1596
</TABLE>
---------------
(1) In the event that Govett International Equity Fund is reorganized with ARK
International Equity Portfolio (rather than ARK International Equity
Selection Portfolio), these 5% shareholders of Govett International Equity
will own 6.10% and 31.74% respectively, of ARK International Equity
Portfolio.
21
<PAGE> 31
As of June 1, 2000, the following persons owned of record or beneficially
5% or more of the shares of the Acquiring Funds:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF SHAREHOLDER PORTFOLIO SHARES PORTFOLIO
------------------------------- ---------------- --------- ----------
<S> <C> <C> <C>
Allfirst Financial Pension Plan Income 4,152,659 11.01%
Allfirst Bank -- Mail Code 109-810 Small-Cap Equity 544,200 10.18%
110 S. Paca Street
Baltimore, MD 21201
IBEW Intl Off Reps & Assts Pen Plan Income 6,716,786 17.81%
IBEW Small-Cap Equity 471,053 11.57%
1125-15th Street, N.W.
Washington, DC 20005-2765
IBEW Off Emp Pen Plan Income 2,457,621 6.52%
IBEW
1125-15th Street, N.W.
Washington, DC 20005-2765
</TABLE>
As of June 1, 2000, the trustees and officers of ARK Funds, as a group,
owned less than 1% of the outstanding shares of each of the Acquiring Funds,
with the exception of the following:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OWNED
NAME AND ADDRESS OF SHAREHOLDER PORTFOLIO SHARES BENEFICIALLY
------------------------------- --------- --------- -------------
<S> <C> <C> <C>
William H. Cowie Jr. & Small-Cap 6,632 0.17%
Barbara Jean Cowie JT Ten Equity
1408 Ruxton Road
Baltimore, MD 21204-6622
Bill Cowie TTEE Small-Cap 34,344 0.86%
BJ & Bill Cowie Charitable Trust Equity
1408 Ruxton Road
Baltimore, MD 21204-6622
-----
Total 1.03%
</TABLE>
Upon consummation of the reorganizations, the above-mentioned holders of
the Acquiring Funds will own the following percentages of shares of the
Acquiring Funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS OF SHAREHOLDER PORTFOLIO OUTSTANDING SHARES
------------------------------- --------- ------------------
<S> <C> <C>
Allfirst Financial Pension Plan Income 1.14%
Allfirst Bank-Mail Code 109-810 Small-Cap 9.46%
110 S. Paca Street Equity
Baltimore, MD 21201
IBEW Intl Off Reps & Assts Pen Plan Income 1.84%
IBEW Small-Cap 8.18%
1125-15th Street, N.W. Equity
Washington, DC 20005-2765
IBEW Off Emp Pen Plan Income 0.67%
IBEW
1125-15th Street, N.W.
Washington, DC 20005-2765
</TABLE>
22
<PAGE> 32
QUORUM. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the reorganizations are not received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of a majority
of those shares represented at the Meeting in person or by proxy. If a quorum is
present, the persons named as proxies will vote in favor of such adjournments if
they determine that adjournment and additional solicitation is reasonable and in
the best interest of shareholders of the Acquired Funds. A quorum is constituted
by the presence in person or by proxy of shareholders entitled to cast a
majority of the votes entitled to be cast at the Meeting.
ANNUAL MEETINGS. Govett Funds does not intend to hold annual meetings of
shareholders for the election of directors and other business unless and until
such time as less than a majority of the directors holding office have been
elected by shareholders, at which time the directors then in office will call a
shareholders' meeting for the purpose of electing directors. Shareholders have
the right to call a meeting of shareholders to consider the removal of one or
more directors or to act on other matters, and such meetings will be called when
requested in writing by the holders of record of 10% or more of Govett Funds'
outstanding shares. To the extent required by law, Govett Funds will assist in
shareholder communications on such matters.
ADDITIONAL INFORMATION ABOUT THE ACQUIRING AND ACQUIRED FUNDS
Additional information about the Acquiring and Acquired Funds is included
in the Prospectus of ARK Funds, which accompanies this Prospectus/Proxy
Statement and is incorporated by reference, and the Class A Retail and
Institutional Class Prospectus of Govett Funds, which are also incorporated by
reference. Additional information for ARK Funds may also be obtained from its
Statement of Additional Information and its Annual Report for the fiscal year
ended April 30, 1999 and Semi-Annual Report for the six-months ended October 31,
1999, which have been filed with the SEC. Additional information about Govett
Funds may also be obtained from its Statement of Additional Information and its
Annual Report for the fiscal year ended December 31, 1999, which have been filed
with the SEC. Copies of the Statement of Additional Information for ARK Funds
may be obtained without charge by calling 1-888-4ARK-FUND. Copies of the Annual
Report and Semi-Annual Report for ARK Funds accompany this Prospectus/Proxy
Statement. Copies of the Prospectus, Statement of Additional Information, and
Annual Report for Govett Funds may be obtained without charge by calling Govett
Funds at 1-800-821-0803. ARK Funds and Govett Funds are subject to certain
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, as applicable, and in accordance with such requirements file reports, proxy
statements, and other information with the SEC. These materials may be inspected
and copied:
- At the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549;
- At the SEC's Regional Offices at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511;
- By writing to the SEC's Public Reference Branch, Office of Consumer
Affairs and Information, 450 Fifth Street, N.W., Washington, D.C. at
rates prescribed by the SEC;
- By e-mail request to [email protected] (for a duplicating fee); and
- On the SEC's EDGAR database on the SEC's Internet Web site at
http://www.sec.gov.
LEGAL MATTERS
Certain legal matters concerning the tax consequences of the
reorganizations will be passed upon by Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, N.W., Washington, D.C. 20036-1800.
23
<PAGE> 33
EXPERTS
The audited financial statements of Govett Funds incorporated by reference
herein and included in Govett Funds' Annual Report to Shareholders for the
fiscal year ended December 31, 1999 have been audited by PricewaterhouseCoopers
LLP, independent auditors. The audited financial statements of ARK Funds
incorporated by reference herein and included in ARK Funds' Annual Report to
Shareholders for the fiscal year ended April 30, 1999 have been audited by KPMG
LLP, independent auditors. The independent auditors' reports are included in the
funds' respective Annual Reports to Shareholders. These financial statements
have been incorporated herein by reference in reliance on PricewaterhouseCoopers
LLP's and KPMG LLP's reports given on their authority as experts in auditing and
accounting.
OTHER BUSINESS
The Board of Directors of Govett Funds knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, it is the intention that proxies, which do not contain specific
restrictions to the contrary, will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Govett Funds in writing at the
address on the cover page of this Prospectus/Proxy Statement or by telephoning
1-800-821-0803.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
24
<PAGE> 34
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") made as of May 17,
2000, by and among The Govett Funds, Inc., a Maryland corporation ("Govett"),
ARK Funds, a Massachusetts business trust ("ARK"), and AIB Govett, Inc., a
Maryland corporation ("AIB Govett").
W I T N E S S E T H:
WHEREAS, the parties hereto desire that substantially all of the assets and
stated liabilities of certain of the separately designated series of Govett
(individually, an "Acquired Fund" and collectively, the "Acquired Funds") be
transferred to, combined with, acquired and assumed by certain of the separately
designated series of ARK (individually, an "Acquiring Fund" and collectively,
the "Acquiring Funds") in exchange for shares of the Acquiring Funds, which
shall thereafter be distributed by Govett to the shareholders of the Acquired
Funds, as follows: Govett Global Income Fund will be combined with the ARK
Income Portfolio; Govett Smaller Companies Fund will be combined with the ARK
Small-Cap Equity Portfolio; Govett International Equity Fund will be combined
with the ARK International Equity Selection Portfolio or ARK International
Equity Portfolio; and Govett Emerging Markets Equity Fund will be combined with
the ARK Emerging Markets Equity Portfolio (which Portfolio shall have nominal
assets and liabilities before such combination) all upon the terms and
conditions hereinafter set forth (each such transaction of an Acquired Fund with
the corresponding Acquiring Fund, a "Reorganization" and collectively, the
"Reorganizations"); and
WHEREAS, the parties intend that, in connection with the Reorganizations,
Govett International Smaller Companies Fund (the "Terminated Fund") will be
reorganized or be terminated and liquidated, Govett will be deregistered as
described in this Agreement and Govett will be dissolved; and
WHEREAS, the parties wish to enter into a definitive agreement setting
forth the terms and conditions of the foregoing transactions and to adopt this
Agreement as a "plan of reorganization" within the meaning of Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, and agreements set forth herein, the parties hereto agree
as follows:
ARTICLE I
TRANSFER OF ASSETS IN EXCHANGE FOR SHARES; ASSUMPTION
OF LIABILITIES; LIQUIDATION OF ACQUIRED FUNDS
Subject to the terms and conditions of this Agreement, the parties agree to
effect the following transactions in respect of the Reorganizations:
1.1 Transfer of Acquired Fund Assets; Issuance of Acquiring Fund
------------------------------------------------------------
Shares. At the Closing (as defined in Section 1.6), of a Reorganization,
-------
Govett, on behalf of the Acquired Funds, shall transfer to ARK all of the assets
of each Acquired Fund, in exchange for and against delivery by ARK of a number
of Retail Class A and Institutional Class shares (including fractional shares)
of beneficial interest, without par value, of the Acquiring Fund specified in
Section 1.5 having an aggregate net asset value equal to the value of the assets
of the Acquired Fund so transferred (the "Acquiring Fund Shares"), in each case
determined and adjusted as provided in Section 1.3, and the assumption of the
stated liabilities of the Acquired Fund as provided in Section 1.4. Portfolio
securities of an Acquired Fund shall be delivered to Allfirst Trust Company,
National Association, the custodian for the Acquiring Fund (the "Custodian"), to
be held for the account of such Acquired Fund, on the day immediately preceding
the Closing Date (as defined in Section 1.6) for the Reorganization of such
Acquired Fund, duly endorsed in proper form for transfer and in such condition
as to constitute good delivery thereof, in accordance with the custom of
brokers, and shall be accompanied by all necessary stock transfer stamps, if
any, or a check for the appropriate purchase price thereof. If Govett shall be
unable to make timely delivery of any portfolio securities of an Acquired Fund
as herein required, ARK may,
A-1
<PAGE> 35
in the exercise of its reasonable discretion, waive such delivery, provided that
Govett has timely delivered such documents, including assignment and escrow
agreements, due bills, confirmation slips and the like, as may reasonably be
requested by ARK and the Custodian. Cash of an Acquired Fund shall be delivered
by Govett on the day immediately preceding the Closing Date and shall be in the
form of currency or a wire transfer in immediately available funds, payable to
the order of "Allfirst Trust Company, National Association, as Custodian for ARK
Funds." On the day immediately preceding the Closing of a Reorganization of an
Acquired Fund, ARK shall issue and deliver to Govett a confirmation evidencing
the Acquiring Fund Shares credited to the account of the Acquired Fund, or
provide satisfactory evidence to Govett that the Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of ARK. It is expressly
agreed that no sales charge will be imposed upon issuance of the Acquiring Fund
Shares or their distribution to shareholders of the Acquired Funds as provided
in Section 1.7.
1.2 Acquired Fund Assets. The assets of the Acquired Funds to be acquired
---------------------
by ARK hereunder shall consist of all property of such Acquired Fund, including,
without limitation, all cash, securities, commodities, and futures interests,
dividends or interest receivable, and any deferred or prepaid expenses shown as
an asset on the statement of assets and liabilities of the Acquired Fund
delivered pursuant to Section 2.5.
1.3 Valuation. The value of the assets of an Acquired Fund to be acquired
----------
by ARK shall be computed by ARK as of the close of regular trading on the New
York Stock Exchange, Inc. (the "Exchange") on the day immediately preceding the
Closing Date for the Reorganization of such Acquired Fund, using the valuation
policies and procedures set forth in the then-current prospectus and statement
of additional information of ARK. The valuation of such assets by ARK shall be
subject to review by Govett and to such adjustments, if any, as may be agreed to
by ARK. The aggregate net asset value of the Acquiring Fund Shares shall be
computed by ARK using the net asset value per share of the Acquiring Fund as of
the close of regular trading on the Exchange on the day immediately preceding
such Closing Date. The share transfer books of Govett in respect of the Acquired
Fund shall be permanently closed as of the close of business on the business day
immediately preceding the Closing Date and no transfer of shares of the Acquired
Fund shall thereafter be made on such books. Govett shall only accept purchase
orders or redemption requests received prior to the close of regular trading on
the Exchange on the business day immediately preceding the Closing Date for its
Reorganization; purchase orders or redemption requests received thereafter shall
be deemed to be orders to purchase or requests for redemption of shares of the
corresponding Acquiring Fund, as the case may be, and shall be executed at the
net asset value per share determined as set forth in the then-current prospectus
and statement of additional information of ARK, provided that the Reorganization
of the Acquired Fund is consummated.
1.4 Acquired Fund Liabilities. At the Closing of the Reorganization of an
--------------------------
Acquired Fund, the Acquiring Fund shall assume the stated liabilities, expenses,
costs, charges, and reserves of the Acquired Fund reflected on the statement of
assets and liabilities of the Acquired Fund delivered pursuant to Section 2.5
(the "Acquired Fund Liabilities"). Each Acquiring Fund shall assume only such
Acquired Fund Liabilities of the corresponding Acquired Fund and shall not
assume any other liabilities, whether absolute or contingent, known or unknown,
accrued or unaccrued. All Acquired Fund Liabilities of an Acquired Fund, to the
extent they exist at or after the Closing, shall after the Closing attach to the
corresponding Acquiring Fund and may be enforced against such Acquiring Fund to
the same extent as if the same had been incurred by the Acquiring Fund.
1.5 Acquired Funds; Corresponding Acquiring Funds. The assets of each
----------------------------------------------
Acquired Fund shall be acquired by the Acquiring Fund identified opposite its
name in Schedule 1.5 attached hereto.
1.6 Closings; Closing Dates. The closing of the Reorganizations of the
------------------------
Acquired Funds shall take place on August 12, 2000, at the offices of
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, NW, 2nd Floor,
Washington, DC, or at such other time and place as may be agreed upon by the
parties. In the event that on the day preceding such date (i) the Exchange is
closed or trading thereon is restricted, or (ii) trading or the reporting of
trading on the Exchange or elsewhere is disrupted so that accurate appraisal of
the value of the assets of the Acquired Fund or the aggregate net asset value of
the Acquiring Fund Shares is impractical, the Reorganization shall be postponed
until such day as may be agreed upon by the parties. The closing of a
A-2
<PAGE> 36
Reorganization is referred to herein as a "Closing" and the date on which the
Closing shall take place is referred to herein as a "Closing Date."
1.7 Distribution of Acquiring Fund Shares. As soon after the Closing of
--------------------------------------
the Reorganization of an Acquired Fund as is conveniently practicable, and in
any event within two business days after the Closing, Govett shall distribute
pro rata to its shareholders of record as of the close of business on the
business day immediately preceding the Closing Date for such Reorganization (the
"Acquired Fund Shareholders"), the Acquiring Fund Shares received by an Acquired
Fund hereunder. Govett shall accomplish such distribution by delivering a
written instruction, signed by the principal executive officer of Govett and
certified by an authorized signatory of FPS Services, Inc., the transfer agent
of Govett, to SEI Investments Distribution Company, the transfer agent of ARK
(the "Transfer Agent"), directing the Transfer Agent to open accounts on the
books of ARK in the names of the Acquired Fund Shareholders and transfer to such
accounts the respective pro rata interest, in full and fractional (to three
decimal places) shares, of each such shareholder in the Acquiring Fund Shares
then credited to the account of the Acquired Fund on the books of ARK. ARK
agrees to instruct the Transfer Agent to comply with such instructions. All
issued and outstanding shares of the Acquired Fund and all certificates, if any,
indicating ownership of such shares shall simultaneously be canceled on the
books of Govett, although from and after the Closing of the Reorganization of an
Acquired Fund each certificate which theretofore represented shares of the
Acquired Fund shall evidence ownership of the corresponding Acquiring Fund
Shares on the basis hereinabove set forth. No redemption or repurchase of any
Acquiring Fund Shares credited to Acquired Fund Shareholders and represented by
unsurrendered certificates shall be permitted until such certificates have been
surrendered for cancellation. ARK shall not issue certificates representing
Acquiring Fund Shares in connection with such distribution. Promptly after the
distribution described above, ARK shall cause appropriate notification to be
mailed to the Acquired Fund Shareholders informing each such shareholder of the
number of Acquiring Fund Shares credited to his account and confirming the
registration thereof in his name. All distributions on the Acquiring Fund Shares
shall be paid to the Acquired Fund Shareholders in cash or invested in
additional shares of the Acquiring Fund at the net asset value thereof on the
respective payment dates in accordance with instructions previously given by
such shareholders to the transfer agent of Govett, provided that such
instructions have been given to the Transfer Agent and such instructions are
consistent with the current prospectus and statement of additional information
of ARK.
1.8 Payment of Transfer Taxes. Any transfer taxes payable upon issuance of
--------------------------
Acquiring Fund Shares in a name other than the name of an Acquired Fund
Shareholder shall, as a condition of such issuance and transfer, be paid by the
person to whom such Acquiring Fund Shares are to be issued and transferred.
1.9 Liquidation of Acquired Funds.
------------------------------
(a) As soon as conveniently practicable after the distribution required
pursuant to Section 1.7 has been made in respect of the Acquired Funds, and the
reorganization or termination and liquidation of the Terminated Fund, Govett
shall take, in accordance with applicable law, all such action as may be
necessary to effect a complete liquidation of Govett.
(b) As soon as conveniently practicable after consummation of the
Reorganizations provided for herein and the reorganization or liquidation and
termination of the Terminated Fund, Govett shall make all filings and take all
such action as may be necessary to effect its dissolution and shall, in
accordance with applicable law, file an application for an order of the
Securities and Exchange Commission (the "Commission") pursuant to Section 8(f)
of the Investment Company Act of 1940, as amended (the "1940 Act"), declaring
that Govett has ceased to be an investment company and take all such other
action as may be necessary to deregister under the 1940 Act. ARK shall provide
assistance to Govett in order to effect the above-mentioned actions.
1.10 Reporting. Any reporting obligation of Govett with respect to an
Acquired Fund is and shall remain the responsibility of Govett until Govett is
deregistered under the 1940 Act. ARK shall provide assistance to Govett to the
extent any such reporting obligations relate to the Reorganizations and shall
provide all information regarding the Acquiring Funds and the Reorganizations as
may be necessary in order for Govett to comply with its reporting obligations.
A-3
<PAGE> 37
ARTICLE II
COVENANTS AND AGREEMENTS
2.1 Conduct of Business. After the date of this Agreement and on or prior
--------------------
to the Closing Date of the Reorganization of an Acquired Fund, Govett and ARK
will conduct the respective businesses of the Acquired Funds and the Acquiring
Funds, respectively, only in the ordinary course, it being understood that such
ordinary course of business shall include the matters contemplated by Section
2.2(b) hereof and the declaration and payment of customary dividends and
distributions and any special dividends or distributions required hereunder.
2.2 Shareholders' Meetings. (a) Govett shall call, convene, and hold a
-----------------------
meeting of shareholders of the Acquired Funds as soon as practicable in
accordance with applicable law, for the purpose of approving this Agreement and
the transactions herein contemplated, and for such other purposes as may be
necessary or desirable, and the directors of Govett shall, subject to the
exercise of their fiduciary duties, recommend a favorable vote thereon. Govett
shall solicit the proxies of shareholders of the Acquired Funds to vote on the
matters to be acted upon at such meeting.
(b) ARK shall call, convene and hold a meeting of shareholders of the ARK
International Equity Selection Portfolio as soon as practicable in accordance
with applicable law, for the purpose of approving the matters listed in Schedule
2.2(b) attached hereto, and for such other purposes as may be necessary or
desirable, and the trustees of ARK shall, subject to the exercise of their
fiduciary duties, recommend a favorable vote thereon. ARK shall solicit the
proxies of shareholders of the ARK International Equity Selection Portfolio to
vote on the matters to be acted upon at such meeting.
2.3 Registration Statement; Prospectus/Proxy Statement. (a) ARK shall
---------------------------------------------------
prepare to be filed with the Commission under the Securities Act of 1933, as
amended (the "1933 Act") and the Securities Exchange Act of 1934, as amended
(the "1934 Act"), relating to the registration of the Acquiring Fund Shares and
the meeting of Govett shareholders referred to in Section 2.2(a), in the form of
a prospectus/proxy statement and related statement of additional information to
be included in the registration statement on Form N-14 of ARK, in connection
with this Agreement. Such registration statement in the form in which it shall
become effective and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date, such registration statement as amended, is
referred to herein as the "Registration Statement." The combined
prospectus/proxy statement and related statement of additional information in
the form first filed with the Commission pursuant to Rule 497(c) under the 1933
Act is referred to herein as the "Prospectus/Proxy Statement." Govett and ARK
will each use its best efforts to cause the Registration Statement to become
effective under the 1933 Act as soon as practicable and agree to cooperate in
such efforts. Upon effectiveness of the Registration Statement, Govett will
cause the Prospectus/Proxy Statement to be delivered to shareholders of the
Acquired Funds entitled to vote on this Agreement and the transactions herein
contemplated in accordance with applicable law.
(b) ARK shall prepare preliminary proxy materials to be filed with the
Commission under the 1934 Act relating to the meeting of shareholders of the ARK
International Equity Selection Portfolio referred to in Section 2.2(b). Such
proxy materials in the form in which they are filed with the Commission pursuant
to paragraph (b) of Rule 14a-6 are referred to herein as the "ARK Proxy
Statement". ARK will cause the ARK Proxy Statement to be delivered to
shareholders of the ARK International Equity Selection Portfolio entitled to
vote on the matters contemplated by Section 2.2(b) in accordance with applicable
law.
2.4 Information. Throughout the period prior to the Closing of a
------------
Reorganization, Govett and ARK shall furnish to one another, and the other's
accountants, legal counsel, and other representatives, all such information
concerning the Acquired Funds or the Acquiring Funds and their businesses and
properties as may reasonably be requested by the other, or by such
representatives.
2.5 Financial Statements. At the Closing of the Reorganization of an
---------------------
Acquired Fund, Govett shall deliver to ARK an unaudited statement of assets and
liabilities of the Acquired Fund, together with an unaudited schedule of
portfolio investments as at the close of business on the day immediately
preceding the Closing Date. These financial statements shall be prepared in
accordance with generally accepted accounting
A-4
<PAGE> 38
principles consistently followed throughout the periods covered by such
statements. Govett shall also deliver to ARK on or before such Closing Date the
detailed tax-basis accounting records for each security to be transferred to the
Acquiring Fund hereunder, which shall be prepared in accordance with the
requirements for specific identification tax-lot accounting and clearly reflect
the bases used for determination of gain and loss realized on the partial sale
of any security to be transferred to the Acquiring Fund. As promptly as
practicable thereafter, Govett shall furnish ARK, in such form as is reasonably
satisfactory to ARK, a statement of the earnings and profits of the Acquired
Fund for federal income tax purposes, which statement shall be certified by the
treasurer of Govett.
2.6 Final Dividend. On or before the Closing Date of the Reorganization of
---------------
an Acquired Fund, Govett shall declare and pay a dividend or dividends on the
shares of Govett Global Income Fund, Govett Smaller Companies Fund, and Govett
International Equity Fund (unless the condition precedent set forth in Section
4.1(a)(ii) shall not have been met), which, together with all previous
dividends, shall have the effect of distributing to shareholders of such
Acquired Fund all of such Acquired Fund's investment company taxable income for
the applicable taxable periods of such Acquired Fund (computed without regard to
any deduction for dividends paid) and all of its net capital gains realized in
the applicable taxable periods of such Acquired Fund (after reduction for any
capital loss carry-forward). For purposes of this Section 2.6, an "applicable
tax period" of such an Acquired Fund shall mean the final taxable year of the
Acquired Fund and any other taxable year of the Acquired Fund with respect to
which the Acquired Fund could elect under Section 855 of the Code to have a
distribution made on or before the Closing Date treated as having been paid
during such other taxable year.
2.7 Other Necessary Action. Govett and ARK shall each take all necessary
-----------------------
corporate or other action and use its best efforts to complete all filings and
obtain all governmental and other consents and approvals required for
consummation of the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Acquired Company. Govett hereby
---------------------------------------------------
represents and warrants to ARK as follows:
(a) Govett is a corporation duly organized and validly existing in
good standing under the laws of the State of Maryland and has full
corporate power to conduct its business as it is now being conducted and to
own the properties and assets it now owns. Govett is qualified to transact
business as a foreign corporation in all jurisdictions in which it conducts
any business or owns any properties or assets, except where the failure to
be so qualified does not cause a material adverse effect on Govett.
(b) Govett is registered with the Commission pursuant to Section 8 of
the 1940 Act as an open-end management investment company.
(c) The audited financial statements of the Acquired Fund for the
fiscal year ended December 31, 1999, delivered to ARK by Govett have been
prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods covered by such statements,
and, together with such notes attached thereto, fairly present the
financial position and results of operations of the Acquired Funds at the
dates of such statements and for the periods covered thereby.
(d) Since December 31, 1999, Govett on behalf of the Acquired Funds
has not incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions, not in the ordinary
course of business, and there has not been any material adverse change, or
any development involving a prospective material adverse change, in the
condition (financial or other), earnings, business, or properties of the
Acquired Funds (other than changes in the ordinary course of business,
including, without limitation, dividends and distributions in the ordinary
course).
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<PAGE> 39
(e) There is no litigation, proceeding or governmental investigation
pending or, to the knowledge of Govett, threatened against or relating to
the Acquired Funds, the properties or business of the Acquired Funds, or
this Agreement.
(f) Each Acquired Fund has qualified and elected to be treated as a
regulated investment company under Subchapter M of the Code for each of its
taxable years. All federal and other tax returns and reports of the
Acquired Funds required by law to have been filed with the proper taxing
authority have been filed with the proper taxing authority, and all federal
and other taxes payable pursuant to such returns and reports have been paid
so far as due, or provision has been made for the payment thereof, and, to
Govett's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to any such return.
(g) When filed with the Commission and from the effective date of the
Prospectus/Proxy Statement until the Closing Date, the Prospectus/Proxy
Statement will comply in all material respects with the applicable
requirements of the 1933 Act, the 1934 Act and the 1940 Act and the
applicable rules and regulations of the Commission promulgated thereunder
and the Prospectus/Proxy Statement (and any supplement thereto) will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; except insofar as
the same are caused by or contained in (a) any information relating to, or
furnished in writing to Govett by, ARK or the Acquiring Funds or (b) any
violation of the 1933 Act, the 1934 Act or any other securities law or rule
or regulation there under caused by ARK.
(h) Except as separately disclosed in writing to ARK,
PricewaterhouseCoopers LLP, which has certified the financial statements of
the Acquired Funds to be filed with the Commission as part of the
Registration Statement, are, to the knowledge of Govett, independent public
auditors as required by the 1933 Act and the rules and regulations of the
Commission thereunder.
(i) Govett has full power and authority to execute, deliver and carry
out the terms of this Agreement on behalf of the Acquired Funds. The
execution, delivery and performance of this Agreement by Govett, and the
consummation of the transactions contemplated hereby, have been duly
authorized by its board of directors, and this Agreement constitutes a
valid and legally binding obligation of Govett, enforceable against Govett
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws affecting the rights of
creditors generally and the exercise of judicial discretion in accordance
with general principles of equity. No other proceedings on the part of
Govett or the shareholders of the Acquired Funds (other than as
contemplated in Section 4.1(a)(i)) are necessary to authorize this
Agreement and the transactions contemplated hereby.
(j) Govett is not in default under any agreement, lease, contract,
indenture, or other instrument or obligation to which it is a party or by
which it or any of its properties or assets are bound and which default is
of material significance in respect of the business or financial condition
of the Acquired Funds. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated and the fulfillment of
the terms hereof will not conflict with or violate or result in a breach of
any of the terms or provisions of, or constitute a default under, any
agreement or other instrument to which Govett is a party, or the charter or
bylaws of Govett, or any statute, order, rule, or regulation of any court
or of any governmental or other regulatory body having jurisdiction,
applicable to Govett.
(k) As of the Closing, Govett will have good and marketable title to
the assets of the Acquired Funds to be transferred to the Acquiring Funds
pursuant to this Agreement, and, subject to the approval of shareholders of
Govett, will have full right, power, and authority to sell, assign,
transfer, and deliver such assets hereunder, and upon delivery and payment
for such assets, the Acquiring Funds will acquire good and marketable title
thereto, free and clear of all liens, mortgages, pledges, encumbrances,
charges, claims, and equities, and subject to no restrictions on the
transfer thereof, except as disclosed in writing to and accepted by ARK
prior to the Closing.
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<PAGE> 40
(l) Neither Govett nor, to the knowledge of Govett, any Acquired Fund
Shareholder has any present intention of redeeming or otherwise disposing
of the Acquiring Fund Shares after the Closing Date, except as provided
pursuant to and in accordance with the terms of this Agreement.
(m) Except as disclosed in the application described in Section 4.3(c)
of this Agreement, to the knowledge of Govett, no entity that is an
affiliated person, or an affiliated person of an affiliated person, of an
Acquired Fund, as that term is defined in Section 2(a)(3) of the 1940 Act,
has the financial incentive and the ability to influence the terms of the
Reorganizations.
3.2 Representations and Warranties of ARK. ARK hereby represents and
--------------------------------------
warrants to Govett as follows:
(a) ARK is a business trust duly organized and validly existing in
good standing under the laws of the Commonwealth of Massachusetts and has
full power to conduct its business as it is now being conducted and to own
the properties and assets it now owns. ARK is qualified to transact
business in all jurisdictions in which it conducts any business or owns any
properties or assets, except where the failure to be so qualified does not
cause a material adverse effect on the Acquiring Fund.
(b) ARK is registered with the Commission pursuant to Section 8 of the
1940 Act as an open-end management investment company.
(c) The authorized capitalization of ARK representing the beneficial
interest in the Acquiring Funds consists of an unlimited number of shares
of beneficial interest, without par value, designated as Retail Class A
shares and Institutional Class shares of "ARK International Equity
Selection Portfolio," "ARK International Equity Portfolio," "ARK Small-Cap
Equity Portfolio," "ARK Income Portfolio" and "ARK Emerging Markets Equity
Portfolio" and Retail Class B shares of "ARK Income Portfolio." All of the
issued and outstanding shares of the Acquiring Funds have been duly and
validly issued and are fully paid and non-assessable by ARK. As of the
Closing, all Acquiring Fund Shares to be issued and delivered by ARK
pursuant to this Agreement have been duly authorized for issuance and, when
issued and delivered as provided herein and in the Prospectus/Proxy
Statement (and any supplement thereto), will be validly issued, fully paid,
and non-assessable by ARK.
(d) The current prospectus and statement of additional information of
ARK comply in all material respects with the applicable requirements of the
1933 Act and the 1940 Act and the applicable rules and regulations of the
Commission thereunder and do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) The audited financial statements for the fiscal year ended April
30, 1999 and unaudited financial statements for the six months ended
October 31, 1999 of the Acquiring Funds delivered to Govett by ARK have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods covered by such statements,
and fairly present the financial position and results of operations of the
Acquiring Funds at the dates of such statements and for the periods covered
thereby.
(f) Since October 31, 1999, ARK on behalf of the Acquiring Funds has
not incurred any material liabilities or obligations, direct or contingent,
or entered into any material transactions, not in the ordinary course of
business, and there has not been any material adverse change, or any
development involving a prospective material adverse change, in the
condition (financial or other), earnings, business, or properties of the
Acquiring Fund (other than changes in the ordinary course of business,
including, without limitation, dividends and distributions in the ordinary
course).
(g) There is no litigation, proceeding or governmental investigation
pending or, to the knowledge of ARK, threatened against or relating to the
Acquiring Funds, the properties or business of the Acquiring Funds, or this
Agreement.
(h) Except for the ARK International Equity Portfolio and the ARK
Emerging Markets Equity Portfolio, each Acquiring Fund has qualified and
elected to be treated as a regulated investment company
A-7
<PAGE> 41
under Subchapter M of the Code for each of its taxable years. The ARK
International Equity Portfolio and the ARK Emerging Markets Equity
Portfolio intend to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Code for each of its taxable
years. All federal and other tax returns and reports of the Acquiring Funds
required by law to have been filed with the proper taxing authority have
been filed with the proper taxing authority, and all federal and other
taxes payable pursuant to such returns and reports have been paid so far as
due, or provision has been made for the payment thereof, and, to ARK's
knowledge, no such return is currently under audit and no assessment has
been asserted with respect to any such return.
(i) When filed with the Commission and from the effective date of the
Prospectus/Proxy Statement until the Closing, the Registration Statement,
Prospectus/Proxy Statement, and the ARK Proxy Statement will comply in all
material respects with the applicable requirements of the 1933 Act, the
1934 Act and the 1940 Act and the applicable rules and regulations of the
Commission thereunder and the Prospectus/Proxy Statement (and any
supplement thereto) and the ARK Proxy Statement do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as the same are caused
by or contained in (a) any information relating to, or furnished in writing
to ARK by, Govett or the Acquired Funds or (b) any violation of the 1933
Act, the 1934 Act or any other securities law or rule or regulation there
under caused by Govett.
(j) KPMG LLP, which has certified the financial statements of the
Acquiring Funds to be filed with the Commission as part of the Registration
Statement, are, to the knowledge of ARK, independent public auditors as
required by the 1933 Act and the rules and regulations of the Commission
thereunder.
(k) ARK has full power and authority to execute, deliver, and carry
out the terms of this Agreement on behalf of the Acquiring Funds. The
execution, delivery, and performance of this Agreement by ARK, and the
consummation of the transactions contemplated hereby, have been duly
authorized by its board of trustees, and this Agreement constitutes a valid
and legally binding obligation of ARK, enforceable against ARK in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws affecting the rights of
creditors generally and the exercise of judicial discretion in accordance
with general principles of equity. No other proceedings on the part of ARK
or the shareholders of the Acquiring Funds (other than as contemplated in
Section 4.1(a)(i)) are necessary to authorize this Agreement and the
transactions contemplated hereby.
(l) ARK is not in default under any agreement, lease, contract,
indenture, or other instrument or obligation to which it is a party or by
which it or any of its properties or assets are bound and which default is
of material significance in respect of the business or financial condition
of the Acquiring Funds. The consummation of the transactions herein
contemplated and the fulfillment of the terms hereof will not conflict with
or violate or result in a breach of any of the terms or provisions of, or
constitute a default under, any agreement or other instrument to which ARK
is a party, or the declaration of trust or by-laws of ARK, or any statute,
order, rule, or regulation of any court or of any governmental or other
regulatory body having jurisdiction applicable to ARK.
(m) Except as disclosed in the application described in Section 4.3(c)
of this Agreement, to the knowledge of ARK, no entity that is an affiliated
person, or an affiliated person of an affiliated person, of an Acquiring
Fund, as that term is defined in Section 2(a)(3) of the 1940 Act, has the
financial incentive and the ability to influence the terms of the
Reorganizations.
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<PAGE> 42
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent to Obligations of Govett. The obligations of
----------------------------------------------
Govett to consummate the Reorganization of each Acquired Fund shall be subject,
at its election, to the performance by ARK of all of the obligations to be
performed by it under this Agreement on or before the Closing Date for the
Reorganization of such Acquired Fund and, in addition thereto, to the following
further conditions:
(a)(i) This Agreement and the transactions contemplated hereby shall
have been duly approved by the requisite affirmative vote of the
outstanding Retail Class A and Institutional Class shareholders of the
Acquired Fund, voting together as a single class, entitled to vote at the
special meeting of shareholders of Govett duly called for such purpose.
(a)(ii) With respect to the Reorganization of the Govett International
Equity Fund, each of the proposed changes in investment policies and other
related matters contemplated by Section 2.2(b) shall have been duly
approved by the requisite affirmative vote of the outstanding shares of the
ARK International Equity Selection Portfolio entitled to vote at the
special meeting of shareholders of the ARK International Equity Selection
Portfolio duly called for such purpose and each such change or other matter
shall have been fully implemented by the ARK International Equity Selection
Portfolio. In the event that the foregoing condition shall not have been
performed by ARK on or before the Closing Date for the Reorganization of
the Govett International Equity Fund, then the assets and stated
liabilities of the Govett International Equity Fund shall be transferred
to, combined with, acquired, and assumed by the ARK International Equity
Portfolio.
(b) ARK shall have furnished to Govett a certificate of ARK, signed by
the principal executive officer and the principal financial officer of ARK,
dated the Closing Date, to the effect that:
(i) the representations and warranties of ARK in this Agreement are
true and correct in all respects on and as of such Closing Date with the
same effect as if made on such Closing Date (except representations and
warranties that speak to a specific date, which shall be true and
correct as of such date) and ARK has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing of the Reorganization of the
Acquired Funds;
(ii) Since the date of the most recent financial statements of the
Acquiring Funds included in the Registration Statement and
Prospectus/Proxy Statement (and any supplement thereto), there has been
no material adverse change in the condition (financial or other),
earnings, business, or properties of such Acquiring Fund (other than
changes in the ordinary course of business, including, without
limitation, dividends and distributions in the ordinary course) and
changes in net asset value per share, except as set forth in or
contemplated in the Registration Statement and Prospectus/ Proxy
Statement (and any supplement thereto);
(iii) The Registration Statement has become effective under the
1933 Act and no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to ARK's knowledge, threatened; and
(iv) The Acquiring Fund Shares shall have been duly qualified for
offering to the public in all states in which such qualification is
required for consummation of the transactions contemplated hereunder.
(c) Prior to the Closing Date, ARK shall have furnished to Govett such
further information, certificates, and documents, including certified
copies of the proceedings of its board of trustees and shareholders, as
Govett may reasonably request.
4.2 Conditions Precedent to Obligations of ARK. The obligations of ARK to
-------------------------------------------
consummate each Reorganization shall be subject, at its election, to the
performance by Govett of all of the obligations to be
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<PAGE> 43
performed by it under this Agreement on or before the Closing Date for such
Reorganization and, in addition thereto, to the following further conditions:
(a) Govett shall have furnished to ARK a certificate of Govett, signed
by the principal financial officer of Acquired Company, dated the Closing
Date, to the effect that the unaudited financial statements of the Acquired
Funds delivered to ARK pursuant to Section 2.5 have been prepared in
accordance with generally accepted accounting principles consistently
followed throughout the periods covered by such statements and fairly
present the financial position and results of operations of the Acquired
Funds at the dates of such statements and for the periods covered thereby.
(b) Govett shall have furnished to ARK a certificate of Govett, signed
by the principal executive officer and the principal financial officer of
Govett, dated the Closing Date, to the effect that:
(i) The representations and warranties of Govett in this Agreement
are true and correct in all respects on and as of such Closing Date with
the same effect as if made on such Closing Date (except representations
and warranties that speak to a specific date, which shall be true and
correct as of such date) and Govett has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing of the Reorganization of the
Acquired Funds;
(ii)Since the date of the most recent financial statements of the
Acquired Funds included in the Registration Statement and
Proxy/Prospectus Statement (or any supplement thereto), there has been
no material adverse change in the condition (financial or other),
earnings, business or properties of the Acquired Fund (other than
changes in the ordinary course of business, including, without
limitation, dividends and distributions in the ordinary course and
changes in net asset value per share, except as set forth in or
contemplated in the Registration Statement and Proxy/ Prospectus
Statement (or any supplement thereto); and
(c) ARK shall have received (i) a certificate of an authorized
signatory of the Custodian stating that the portfolio securities, cash and
other assets of such Acquired Fund have been delivered as provided in
Section 1.1 and (ii) a certificate of an authorized signatory of the
Transfer Agent stating that its records contain the names and addresses of
the Acquired Fund Shareholders and the number and percentage of ownership
of the Acquiring Fund Shares to be transferred to the account of each such
shareholder upon the consummation of the Reorganization of the Acquired
Fund.
(d) Prior to the Closing Date, Govett shall have furnished to ARK such
further information, certificates, and documents, including certified
copies of the proceedings of its board of directors and shareholders, as
ARK may reasonably request.
4.3 Other Conditions Precedent. The obligations of the parties hereto to
---------------------------
consummate the Reorganization shall be subject to the fulfillment, prior to or
at the Closing, of each of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been duly approved by the requisite affirmative vote of the shareholders of
the ARK International Equity Selection Portfolio;
(b) Govett and ARK shall have received a legal opinion or opinions
from Kirkpatrick & Lockhart LLP satisfactory to the parties and their
counsel, to the effect that, if the transactions contemplated by this
Agreement are consummated in accordance with the terms hereof, for federal
income tax purposes:
(i) the transfer by each Acquired Fund of its assets to the
corresponding Acquiring Fund solely in exchange for shares of the
corresponding Acquiring Fund and the assumption by such Acquiring Fund
of the stated liabilities of the Acquired Fund as herein provided, and
the distribution of such shares to the shareholders of the Acquired
Fund, as provided in this Agreement, will constitute a "reorganization"
within the meaning of Section 368(a)(1) of the Code and each such Fund
will be "a party to the reorganization" within the meaning of Section
368(b) of the Code;
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<PAGE> 44
(ii) no gain or loss will be recognized by an Acquired Fund on the
transfer of its assets to the corresponding Acquiring Fund in exchange
for the Acquiring Fund Shares and the assumption of the stated
liabilities of the Acquired Fund, and no gain or loss will be recognized
by the Acquired Fund on the distribution of the Acquiring Fund Shares to
the Acquired Fund Shareholders;
(iii) no gain or loss will be recognized by an Acquiring Fund upon
the receipt of the assets of the corresponding Acquired Fund in exchange
for the Acquiring Fund Shares and the assumption of the stated
liabilities of the Acquired Fund;
(iv) the adjusted tax basis of each asset of each Acquired Fund in
the hands of the corresponding Acquiring Fund will be the same as the
adjusted tax basis of such asset in the hands of the Acquired Fund
immediately prior to the Reorganization;
(v) the holding period of each asset of each Acquired Fund in the
hands of the corresponding Acquiring Fund will include the holding
period of such asset in the hands of the Acquired Fund immediately prior
to the Reorganization;
(vi) no gain or loss will be recognized by the Acquired Fund
Shareholders upon the receipt of the Acquiring Fund Shares (including
fractional shares) by such shareholders, provided that such shareholders
receive solely Acquiring Fund Shares (including fractional shares) in
exchange for their shares of the Acquired Fund;
(vii) the adjusted basis of the Acquiring Fund Shares (including
fractional shares) received by each Acquired Fund Shareholder will be
the same as the adjusted tax basis of the shares of the Acquired Fund
surrendered immediately prior to the Reorganization;
(viii) the holding period of the Acquiring Fund Shares (including
fractional shares) received by each Acquired Fund Shareholder will
include the holding period of the shares of the Acquired Fund
surrendered in exchange therefore, provided that such shares were held
as a capital asset in the hands of the Acquired Fund Shareholder on the
date of the exchange; and
(ix) in rendering such opinion, Kirkpatrick & Lockhart LLP shall
require delivery of and rely on representation letters delivered by ARK,
Govett and, if necessary, certain shareholders of the Acquired Funds.
Such representation letters shall be in such form and substance as shall
be satisfactory to Kirkpatrick & Lockhart LLP.
(c) ARK and Govett shall have received from the Commission an order
approving an application of ARK on behalf of the Acquiring Funds and Govett
on behalf of the Acquired Funds for an order exempting them from Section 17
of the 1940 Act in connection with the Reorganization. All state securities
law and all other governmental approvals necessary or advisable in the
opinion of counsel to consummate the transactions contemplated by this
Agreement shall have been received and shall not contain any provision
which is unduly burdensome.
(d) No suit, action or other proceeding against Govett or ARK or their
respective officers or directors/trustees shall be threatened or pending
before any court or governmental agency in which it will be, or it is,
sought to restrain or prohibit any of the transactions contemplated by this
Agreement or to obtain damages or other relief in connection with this
Agreement or the transactions contemplated hereby.
(e) Articles of transfer shall have been filed and accepted for record
by the Maryland State Department of Assessments and Taxation.
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<PAGE> 45
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated with respect to the
------------
Reorganization of an Acquired Fund and the transactions contemplated hereby with
respect to such Reorganization abandoned any time prior to the Closing of such
Reorganization (notwithstanding any approval of this Agreement and the
transactions herein contemplated by the shareholders of the Acquired Fund):
(i) by mutual written consent of the parties duly authorized by or on
behalf of their respective boards of directors/trustees;
(ii) by either party at any time after September 30, 2000, if the
Closing has not occurred on or prior to such date or if there shall be any
law or regulation that makes consummation of the transactions contemplated
by this Agreement illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining a party from consummating the
transactions herein contemplated is entered and such judgment, injunction,
order or decree shall become final and nonappealable; or
(iii) by Govett if the shareholders of the Acquired Fund shall have
voted upon and not approved this Agreement and the transactions herein
contemplated.
The party desiring to terminate this Agreement pursuant to clause (ii) or (iii)
shall give notice of such termination to the other party in the manner specified
in Section 6.1. In the event of any such termination, there shall be no
liability for damages on the part of either Govett or ARK, or their respective
directors, trustees or officers, to the other party or its directors, trustees
or officers. No termination of this Agreement shall affect the obligations of
AIB Govett under Section 6.5 of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices, requests and other communications to a party
--------
hereunder shall be in writing (including facsimile or similar writing),
addressed to such party and given at or sent to the following address:
(a) in the case of Govett or AIB Govett:
The Govett Funds, Inc.
250 Montgomery Street, Suite 1200
San Francisco, CA 94104
Attention: Secretary
Facsimile: (415) 263-1880
with a copy to:
Regina M. Pisa, P.C.
Goodwin, Procter & Hoar LLP
One Exchange Place
Boston, MA 02109-2881
Facsimile: (617) 523-1231
(b) in the case of ARK:
ARK Funds
One Freedom Valley Drive
Oaks, PA 19456
Attention: Secretary
Facsimile: (610) 676-1040
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<PAGE> 46
with a copy to:
Alan C. Porter, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
2nd Floor
Washington, DC 20036-1800
Facsimile: (202) 778-9100
or such other address or facsimile number as either party may hereafter specify
for the purpose by notice to the other party. Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in this Section 6.1 and the
appropriate answer back is received, or (ii) if given by any other means, when
delivered at the address specified in this Section 6.1.
6.2 Amendments; Waivers. Any provision of this Agreement may be amended or
--------------------
waived prior to the Closing of the Reorganization of an Acquired Fund if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by each party or, in the case of a waiver, by the party against which
the waiver is to be effective; provided that following the approval by
shareholders at the meeting of the shareholders of such Acquired Fund pursuant
to Section 2.2 of this Agreement, no such amendment or waiver shall, without the
further approval of such shareholders, alter or change any of the terms or
conditions of this Agreement if such alteration or change would adversely affect
the shareholders of the Acquired Fund.
6.3 Successors. The provisions of this Agreement shall be binding upon and
-----------
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no party may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the consent of the
other party hereto.
6.4 Broker's or Finder's Fees. The parties represent and warrant to each
--------------------------
other that the transactions contemplated by this Agreement have been negotiated
directly between them, without the intervention of any person as a result of any
action by them in such a manner as to give rise to a valid claim for a brokerage
commission, finder's fee or like payment.
6.5 Expenses. The parties hereby acknowledge that AIB Govett, Inc. or an
---------
affiliate will pay all expenses incurred in connection with entering into and
carrying out the transactions contemplated by this Agreement, whether or not the
transactions contemplated hereby are consummated. Such expenses include, without
limitation, (i) expenses associated with the preparation and filing of the
Registration Statements and proxy statements; (ii) fees and expenses for
registration or qualification of the Acquiring Fund Shares under the 1933 Act
and state securities or "blue sky" laws; (iii) fees and disbursements of legal
counsel and accountants; and (iv) postage, printing and proxy solicitation
costs.
6.6 Governing Law. This Agreement shall be construed in accordance with
--------------
and governed by the laws of the State of Maryland.
6.7 Survival. The covenants, agreements, representations, and warranties
---------
of the parties in respect of the Reorganization of an Acquired Fund contained
herein (other than the agreements in Section 6.5) shall not survive, and shall
be extinguished by, the Closing of such Reorganization.
6.8 Counterparts. This Agreement may be signed in counterparts, each of
-------------
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
6.9 Entire Agreement. This Agreement constitutes the entire agreement
-----------------
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, understandings and negotiations, both written and oral,
between the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition, or warranty other
than as set forth herein has been made or relied upon by either party hereto.
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<PAGE> 47
6.10 Captions. The captions herein are included for convenience of
---------
reference only and shall be ignored in the construction or interpretation
hereof.
6.11 Parties in Interest. Nothing expressed or implied herein is intended
--------------------
or shall be construed to confer upon any person, other than the parties hereto,
any rights or remedies under or by reason of this Agreement or the transactions
contemplated hereby.
6.12 Limitation of Liability.
------------------------
(a) A copy of the declaration of trust of ARK is on file with the Secretary
of State of the Commonwealth of Massachusetts, and it is expressly agreed that
this instrument is executed on behalf of ARK by the officers thereof in such
capacities, and not individually, and that the obligations of this instrument
are not binding upon any of the trustees, officers, or shareholders of ARK
personally, but are binding only upon the assets and property of ARK.
(b) The parties specifically acknowledge and agree that any liability under
this Agreement, or in connection with the transactions herein contemplated, to
an Acquiring Fund or an Acquired Fund shall be discharged only out of the assets
of the Acquiring Fund or Acquired Fund, as the case may be, and that no other
series of Govett or ARK shall be liable with respect thereto.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
[SIGNATURE PAGES HAVE BEEN OMITTED]
SCHEDULE 1.5
<TABLE>
<CAPTION>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
<S> <C>
Govett Global Income Fund ARK Income Portfolio
Govett Smaller Companies Fund ARK Small-Cap Equity Portfolio
Govett Emerging Markets Equity Fund ARK Emerging Markets Equity Portfolio
Govett International Equity Fund ARK International Equity Selection
Portfolio(1)
</TABLE>
---------------
(1) In the event that the condition precedent to the Reorganization set forth in
Section 4.1(a)(ii) has not been met on or by the Closing Date for such
Reorganization, then the Govett International Equity Fund shall be
reorganized with and into the ARK International Equity Portfolio (which
Portfolio shall have nominal assets and liabilities before such
combination).
SCHEDULE 2.2(b)
The purpose of the Meeting is to consider and act upon the following proposals.
- To modify the fund's investment objectives and policies to permit
directly investing in foreign securities as opposed to investing in other
investment companies that invest in such foreign securities.
- To approve an amended management contract to increase the advisory fee
for the fund.
- To approve an amended sub-advisory contract for the fund.
- To transact such other matters as may properly come before the Meeting or
any adjournments thereof.
A-14
<PAGE> 48
APPENDIX B
INVESTMENT PRACTICES
The Acquired Funds and the Acquiring Funds follow similar principal
investment practices. These practices are as follows, with certain differences
noted.
DEPOSITARY RECEIPTS. The funds may invest in sponsored and unsponsored
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts (GDRs"), and similar global instruments to the extent
that they may invest in the underlying securities. A U.S. or foreign bank or
trust company typically "sponsors" these depositary instruments, which evidence
ownership of underlying securities issued by a U.S. or foreign corporation.
Unsponsored programs are organized independently and without the cooperation of
the issuer of the underlying securities. As a result, information about the
issuer may not be as readily available or as current as for sponsored depositary
instruments, and prices may be more volatile than if they were sponsored by the
issuers of the underlying securities.
INVESTMENT IN DEBT SECURITIES AND COMMERCIAL PAPER. The funds may invest
in debt obligations convertible into equity securities and in non-convertible
debt securities. At least 75% of each of the Acquired Funds' total assets
invested in non-convertible debt securities (other than commercial paper) must
be rated, at the time of purchase, at least in the A category by Standard &
Poor's or Moody's or, if unrated, determined to be of comparable quality by the
fund's investment manager. The Acquired Funds' commercial paper investments
must, at the time of purchase, be rated at least Prime-2 by Moody's or A-2 by
Standard & Poor's or, if unrated, determined to be of comparable quality by the
fund's investment manager. The subsequent downgrade of a debt security to a
level below the investment grade required by the fund will not require an
immediate sale of that security, but the investment manager will consider the
circumstances of the downgrade in determining whether to hold that security,
including causes of the downgrade, local market conditions, and general economic
trends. The Acquiring Funds do not have a stated restriction regarding rating of
debt securities or commercial paper.
TEMPORARY STRATEGIES. To retain flexibility to respond promptly to adverse
changes in market and economic conditions, a fund may use temporary defensive
strategies. Under such a strategy, a fund may hold cash (either U.S. dollars,
foreign currencies or multinational currency units), and/or invest any portion
of all of its assets in short-term, high quality debt securities. For debt
obligations other than commercial paper, such instruments must be rated, at the
time of purchase, at least AAA by Standard & Poor's or Aaa by Moody's. For
commercial paper, such investments must be rated, at the time of purchase, at
least A-2 by Standard & Poor's or Prime-2 to Moody's. If such investments are
unrated, a fund's advisor must have determined that they are of comparable
quality to the required ratings for each type of investment. It is impossible to
predict when or for how long a fund's advisor may use such temporary strategies.
HEDGING STRATEGIES. The funds may use certain hedging strategies to
attempt to reduce the overall level of investment and currency risk normally
associated with their investments, although there can be no assurance that such
efforts will succeed. Among the types of transactions which may be used are:
forward currency contracts, writing of covered put and call options, purchase of
put and call options on currencies and equity and debt securities, stock index
futures and options thereon, interest rate or currency futures and options
thereon, and securities futures and options thereon.
REPURCHASE AGREEMENTS AND OVERNIGHT TIME DEPOSITS. Each fund may enter
into repurchase agreements, in which the fund acquires a high-grade liquid debt
security from a U.S. bank, broker-dealer or other financial institution that
simultaneously agrees to repurchase the security at a specified time and price.
Repurchase agreements are collateralized, in an amount at least equal to the
current value of the loaned securities, plus any accrued interest, by cash,
letters of credit, U.S. government securities, or, in the case of the Acquired
Funds only, other high grade liquid debt securities, at the custodian (or
designated subcustodian), segregated from other fund assets. In segregating such
assets, the fund's custodian either places them in a segregated account or
separately identifies them and makes them unavailable for investment by the
fund. The
B-1
<PAGE> 49
Acquired Funds may also invest in overnight time deposits placed at competitive
interest rates with creditworthy banks, including with their global custodian.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Acquiring and Acquired
Funds may invest in such companies to the extent permitted under the 1940 Act. A
fund may not invest in any investment companies managed by its investment
advisor or any of its affiliates. Investments in investment companies may
involve a duplication of certain expenses, such as management and administrative
expenses. Emerging and developing markets countries often limit foreign
investments in equity securities of issuers in such countries. As a result, the
funds may be able to invest in such countries solely or primarily through open-
or closed-end investment companies.
B-2
<PAGE> 50
APPENDIX C
ARRANGEMENTS WITH SERVICE PROVIDERS
ACQUIRING FUNDS
Allied Investment Advisors, Inc. ("AIA") serves as the investment advisor
to the Acquiring Funds and is entitled to receive an investment advisory fee,
which is accrued daily and paid monthly, from the Acquiring Funds at the annual
rates described in the fee tables in the Prospectus/Proxy Statement; see
"Comparative Fee Tables". See "Management" in the Prospectuses of ARK Funds,
which are incorporated herein by reference, for additional information regarding
AIA.
AIB Govett, Inc. ("AIB Govett") will serve as investment subadvisor to the
ARK Emerging Markets Equity Portfolio and ARK International Equity Selection
Portfolio (or ARK International Equity Portfolio).
SEI Investments Distribution Co., a wholly-owned subsidiary of SEI
Investments Company, serves as the distributor for the shares of the Acquiring
Funds.
Pursuant to the provisions of a distribution plan for Retail Class A of
each Acquiring Fund adopted in accordance with Rule 12b-1 under the 1940 Act,
each Acquiring Fund may pay a fee to the distributor of up to 0.75% of the
average net assets of the Retail Class A of the Acquiring Fund. The Board of
Trustees has approved a distribution fee rate for the Retail Class A of each
Acquiring Fund of 0.40%. The distributor may use these distribution fees to
compensate securities dealers and others selling Retail Class A shares of the
Acquiring Funds.
Under shareholder services plans the Acquiring Funds may pay shareholder
services fees to investment professionals at an annual rate of up to 0.25% of
the average net assets of the Retail Class A or Institutional Class shares
attributable to their customers for providing ongoing shareholder support
services to their customers with accounts in such class. The Board of Trustees
has approved an annual shareholder services fee rate of 0.15% for the Retail
Class A and 0.06% for the Institutional Class of each Acquiring Fund.
SEI Investments Mutual Funds Services ("SMF") provides administrative
services to the Acquiring Funds. SEI Investments Financial Management
Corporation, a wholly-owned subsidiary of SEI Investments, is the owner of all
beneficial interest in SMF. For its services, SMF receives a fee, which is
calculated daily and paid monthly, at the annual rate of 0.13% of the aggregate
average net assets of each Acquiring Fund. SMF may voluntarily waive all or a
portion of its fee from time to time in its sole discretion. Pursuant to a
separate agreement with SMF, Allfirst Trust Company, National Association,
performs sub-administration services on behalf of the Acquiring Funds, for which
it receives a fee from SMF at the annual rate of up to 0.0275% of each Acquiring
Fund's aggregate average daily net assets. See "Management" in the Prospectus of
ARK Funds, which is incorporated herein by reference, for additional information
about SMF.
Allfirst Trust Company, National Association, serves as custodian for the
securities and cash of the Acquiring Funds. Foreign securities are held by
foreign banks participating in a network coordinated by Bankers Trust, which
serves as sub-custodian for the Acquiring Funds.
SMF provides transfer agent and related services for the Acquiring Funds
and has subcontracted the transfer agency services to State Street Bank and
Trust Company, which maintains shareholder accounts and records for the
Acquiring Funds.
ACQUIRED FUNDS
Pursuant to an investment management contract with Govett Funds, and
subject to such policies as the Board of Directors of Govett Funds may
establish, AIB Govett provides the Acquired Funds with day-to-day management
services and makes investment decisions on their behalf in accordance with the
Acquired Funds' investment policies. Subject to the supervision of the Govett
Funds board, AIB Govett also oversees the Acquired Funds' operations. For these
investment management services, each Acquired Fund pays a monthly fee to AIB
Govett, as determined at the close of business of each business day during the
month, at an annual
C-1
<PAGE> 51
rate of 1% of the average daily net assets of each Acquired Fund. From its
investment management fee, AIB Govett pays AIB Govett Asset Management Limited
to provide certain investment sub-advisory services for the Acquired Funds.
Govett Funds Institutional Class is not subject to any sales charges,
shareholder services fees, or 12b-1 distribution fees. Govett Funds Class A
Retail is not subject to any sales charges or shareholder services fees, but is
subject to a 12b-1 distribution fee of .35%.
FPS Broker Services, Inc. is the distributor and principal underwriter for
the Acquired Funds.
Chase Global Funds Services Company provides administration and accounting
services for the Acquired Funds. The Chase Manhattan Bank serves as the Acquired
Funds' global custodian. FPS Services, Inc., a former affiliate of the Acquired
Funds' distributor, provides transfer agent, shareholder services agent, and
dividend disbursement services to the Acquired Funds.
C-2
<PAGE> 52
APPENDIX D
PRINCIPAL RISK FACTORS
EQUITY RISK. Equity securities include publicly and privately issued
equity securities, common and preferred stocks, warrants, rights to subscribe to
common stock and convertible securities, as well as instruments that attempt to
track the price movement of equity indices. Investments in equity securities and
equity derivatives in general are subject to market risks that may cause their
prices to fluctuate over time. Equity derivatives may be more volatile and
increase portfolio risk. The value of securities convertible into equity
securities, such as warrants or convertible debt, is also affected by prevailing
interest rates, the credit quality of the issuer, and any call provision.
Fluctuations in the value of equity securities in which a mutual fund invests
will cause its portfolio's net asset value to fluctuate. An investment in a
portfolio of equity securities may be more suitable for long-term investors who
can bear the risk of these share price fluctuations.
FIXED INCOME RISK. The market values of fixed income investments change in
response to interest rate changes and other factors. During periods of falling
interest rates, the values of outstanding fixed income securities generally
rise. Moreover, while securities with longer maturities tend to produce higher
yields, the prices of longer maturity securities are also subject to greater
market fluctuations as a result of changes in interest rates. In addition to
these fundamental risks, different types of fixed income securities may be
subject to the following additional risks:
- CALL RISK. During periods of falling interest rates, certain debt
obligations with high interest rates may be prepaid (or "called") by the
issuer prior to maturity. This may cause a fund's average weighted
maturity to fluctuate, and may require a fund to invest the resulting
proceeds at lower interest rates.
- CREDIT RISK. The possibility that an issuer will be unable to make
timely payments of either principal or interest.
FOREIGN MARKET RISK. Equity and bond markets outside the U.S. have
significantly outperformed U.S. markets from time to time. Consequently,
investments in foreign securities may provide greater long-term investment
returns than would be available from investing solely in U.S. securities.
Nevertheless, each fund's portfolio is subject to market risk -- the possibility
that stock prices will decline over short, or even extended, periods -- to a
greater degree than domestic investments, as a result of a variety of factors
that can affect stock prices.
For example, there may be less information publicly available about foreign
companies, and less government regulation and supervision of foreign stock
exchanges, securities dealers and publicly traded companies than is available
about comparable U.S. entities. Accounting, auditing and financial reporting
standards, practices and requirements are not uniform and may be less rigorous
than U.S. standards. Securities of some foreign companies are less liquid, and
their prices are more volatile, than securities of comparable U.S. companies.
Trading settlement practices in some markets may be slower or less frequent than
in the U.S., which could affect liquidity of a fund's portfolio. Trading
practices abroad may offer less protection to investors. In some foreign
countries, any or all of expropriation, nationalization, and confiscation are
risks to which non-U.S. securities may be subject. A foreign government's limits
on the repatriation of distributions and profits and on removal of securities,
property, or other assets from that country may affect a fund's liquidity and
the value of its assets. Political or social instability, including war or other
armed conflict, or diplomatic developments also could affect U.S. investors.
CURRENCY RISK. International investors are also exposed to currency risk
if the U.S. dollar value of securities denominated in other currencies is
adversely affected by exchange rate movements. Currency risk could affect the
value of a fund's investments, the value of dividends and interest earned by a
fund, and gains that may be realized.
FOREIGN TAXATION RISK. Some foreign governments levy brokerage taxes,
increasing the cost of securities subject to the tax and reducing the realized
gain (or increasing the realized loss) on such securities
D-1
<PAGE> 53
when they are sold. Foreign governments may withhold taxes from dividends or
interest paid. Such taxes lower a fund's net asset value.
FOREIGN SECURITY RISKS. Investments in securities of foreign companies or
governments can be more volatile than investments in U.S. companies or
governments. Diplomatic, political, or economic developments, including
nationalization or appropriation, could affect investments in foreign countries.
Foreign securities markets generally have less trading volume and less liquidity
than U.S. markets. In addition, the value of securities denominated in foreign
currencies, and of dividends from such securities, can change significantly when
foreign currencies strengthen or weaken relative to the U.S. dollar. Foreign
companies or governments generally are not subject to uniform accounting,
auditing, and financial reporting standards comparable to those applicable to
U.S. companies or governments. Transaction costs are generally higher than those
in the U.S. and expenses for custodial arrangements of foreign securities may be
somewhat greater than typical expenses for custodial arrangements of similar
U.S. securities. Some foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of these
taxes is recoverable, the non-recovered portion will reduce the income received
from the securities comprising the Portfolio.
In addition to these risks, certain foreign securities may be subject to
the following additional currency risks. Investments in foreign securities
denominated in foreign currencies involve additional risks, including:
- The value of a fund's assets measured in U.S. dollars may be affected by
changes in currency rates and in exchange control regulations.
- A fund may incur substantial costs in connection with conversions between
various currencies.
- A fund may be unable to hedge against possible variations in foreign
exchange rates or to hedge a specific security transaction or portfolio
position.
- Only a limited market currently exists for hedging transactions relating
to currencies in certain emerging markets.
INVESTING IN EMERGING MARKETS RISK. The risks of investing in foreign
securities are intensified if the investments are in emerging or developing
markets. In general, these markets may offer special investment opportunities
because their securities markets, industries, and capital structure are growing
rapidly, but investments in these countries involve special risks not present in
the U.S. or in mature foreign markets, such as Germany or the United Kingdom,
for example. Settlement of securities trades may be subject to extended delays,
so that a fund may not receive securities purchased or the proceeds of sales of
securities on a timely basis. Emerging markets generally have smaller,
less-developed trading markets and exchanges, which may affect liquidity, so
that a fund may not be able to dispose of those securities quickly and at a
reasonable price. These markets may also experience greater volatility, which
can materially affect the value of a fund's portfolio holdings and, therefore,
its net asset value. Emerging market countries may have relatively unstable
governments. In such an environment the risk of nationalization of business or
of prohibitions on repatriation of assets is greater than in more stable,
developed political and economic circumstances. The economy of a developing
market country may be predominantly based on only a few industries, and it may
be highly vulnerable to changes in local or global trade conditions. The legal
and accounting systems, and mechanisms for protecting property rights, may not
be as well developed as those in more mature economies. In addition, some
emerging markets countries have general or industry-specific restrictions on
foreign ownership that may limit or eliminate the fund's opportunities to
acquire desirable securities.
D-2
<PAGE> 54
PROXY
THE GOVETT FUNDS, INC.
3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406--0903
Proxy for Special Meeting of Shareholders
August 4, 2000
This Proxy is Solicited on Behalf of the Board of
Directors of The Govett Funds, Inc.
The undersigned Shareholder(s) of the Govett Global Income Fund ("the Fund"), of
The Govett Funds, Inc. ("Govett"), hereby appoint(s) Colin J. Kreidewolf and
John Hunt, each of them (with full power of substitution), the proxy or proxies
of the undersigned to attend the Special Meeting of Shareholders ("the
"Meeting") of Govett to be held on Friday, August 4, 2000, and any adjournment
thereof, to vote all of the shares of the Fund that the signer would be entitled
to vote on the proposals set forth below if personally present at the Meeting
and on any matters brought before the Meeting, as is set forth in the Notice of
Special Meeting of Shareholders. Said proxies are directed to vote or refrain
from voting pursuant to the Prospectus/Proxy Statement as checked below.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE SIGNING
SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE PROPOSAL.
PLEASE DATE, SIGN AND RETURN PROMPTLY
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
THE GOVETT FUNDS, INC.
VOTE ON PROPOSALS
1. Proposal to reorganize the Govett Global Income Fund with and into the ARK
Income Portfolio.
FOR AGAINST ABSTAIN
/ / / / / /
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Special Meeting of Shareholders and the Prospectus/Proxy Statement of
the Board of Directors.
Your signature (s) on this proxy should be exactly as your name or names
appear on this proxy. If the shares are held jointly, each holder should sign.
If signing is by attorney, executor, administrator, trustee or guardian, please
print your full title below the signature.
Date ____________
/
________________________________________________________
Shareholder sign here Co-owner sign here
<PAGE> 55
PROXY
THE GOVETT FUNDS, INC.
3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406--0903
Proxy for Special Meeting of Shareholders
August 4, 2000
This Proxy is Solicited on Behalf of the Board
of Directors of The Govett Funds, Inc.
The undersigned Shareholder(s) of the Govett Smaller Companies Fund ("the
Fund"), of The Govett Funds, Inc. ("Govett"), hereby appoint(s) Colin J.
Kreidewolf and John Hunt, each of them (with full power of substitution), the
proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders ("the "Meeting") of Govett to be held on Friday, August 4, 2000,
and any adjournment thereof, to vote all of the shares of the Fund that the
signer would be entitled to vote on the proposals set forth below if personally
present at the Meeting and on any matters brought before the Meeting, as is set
forth in the Notice of Special Meeting of Shareholders. Said proxies are
directed to vote or refrain from voting pursuant to the Prospectus/Proxy
Statement as checked below.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE SIGNING
SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE PROPOSAL.
PLEASE DATE, SIGN AND RETURN PROMPTLY
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
THE GOVETT FUNDS, INC.
VOTE ON PROPOSALS
1. Proposal to reorganize the Govett Smaller Companies Fund with and into the
ARK Small-Cap Equity Portfolio.
FOR AGAINST ABSTAIN
/ / / / / /
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Special Meeting of Shareholders and the Prospectus/Proxy Statement of
the Board of Directors.
Your signature (s) on this proxy should be exactly as your name or names
appear on this proxy. If the shares are held jointly, each holder should sign.
If signing is by attorney, executor, administrator, trustee or guardian, please
print your full title below the signature.
Date ____________
/
________________________________________________________
Shareholder sign here Co-owner sign here
<PAGE> 56
PROXY
THE GOVETT FUNDS, INC.
3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406--0903
Proxy for Special Meeting of Shareholders
August 4, 2000
This Proxy is Solicited on Behalf of the Board
of Directors of The Govett Funds, Inc.
The undersigned Shareholder(s) of the Govett Emerging Markets Equity Fund ("the
Fund"), of The Govett Funds, Inc. ("Govett"), hereby appoint(s) Colin J.
Kreidewolf and John Hunt, each of them (with full power of substitution), the
proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders ("the "Meeting") of Govett to be held on Friday, August 4, 2000,
and any adjournment thereof, to vote all of the shares of the Fund that the
signer would be entitled to vote on the proposals set forth below if personally
present at the Meeting and on any matters brought before the Meeting, as is set
forth in the Notice of Special Meeting of Shareholders. Said proxies are
directed to vote or refrain from voting pursuant to the Prospectus/Proxy
Statement as checked below.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE SIGNING
SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE PROPOSAL.
PLEASE DATE, SIGN AND RETURN PROMPTLY
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
THE GOVETT FUNDS, INC.
VOTE ON PROPOSALS
1. Proposal to reorganize the Govett Emerging Markets Equity Fund with and
into the ARK Emerging Markets Equity Portfolio.
FOR AGAINST ABSTAIN
/ / / / / /
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Special Meeting of Shareholders and the Prospectus/Proxy Statement of
the Board of Directors.
Your signature (s) on this proxy should be exactly as your name or names
appear on this proxy. If the shares are held jointly, each holder should sign.
If signing is by attorney, executor, administrator, trustee or guardian, please
print your full title below the signature.
Date ____________
/
________________________________________________________
Shareholder sign here Co-owner sign here
<PAGE> 57
PROXY
THE GOVETT FUNDS, INC.
3200 HORIZON DRIVE
KING OF PRUSSIA, PA 19406--0903
Proxy for Special Meeting of Shareholders
August 4, 2000
This Proxy is Solicited on Behalf of the Board
of Directors of The Govett Funds, Inc.
The undersigned Shareholder(s) of the Govett International Equity Fund ("the
Fund"), of The Govett Funds, Inc. ("Govett"), hereby appoint(s) Colin J.
Kreidewolf and John Hunt, each of them (with full power of substitution), the
proxy or proxies of the undersigned to attend the Special Meeting of
Shareholders ("the "Meeting") of Govett to be held on Friday, August 4, 2000,
and any adjournment thereof, to vote all of the shares of the Fund that the
signer would be entitled to vote on the proposals set forth below if personally
present at the Meeting and on any matters brought before the Meeting, as is set
forth in the Notice of Special Meeting of Shareholders. Said proxies are
directed to vote or refrain from voting pursuant to the Prospectus/Proxy
Statement as checked below.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED HEREIN BY THE SIGNING
SHAREHOLDER(S). IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE PROPOSAL.
PLEASE DATE, SIGN AND RETURN PROMPTLY
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
THE GOVETT FUNDS, INC.
VOTE ON PROPOSALS
1. Proposal to reorganize the Govett International Equity Fund with and into
the ARK International Equity Selection Portfolio.
FOR AGAINST ABSTAIN
/ / / / / /
2. Proposal to reorganize the Govett International Equity Fund with and into
the ARK International Equity Portfolio, if shareholders of ARK
International Equity Selection Portfolio do not approve certain changes.
FOR AGAINST ABSTAIN
/ / / / / /
3. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Special Meeting of Shareholders and the Prospectus/Proxy Statement of
the Board of Directors.
Your signature (s) on this proxy should be exactly as your name or names
appear on this proxy. If the shares are held jointly, each holder should sign.
If signing is by attorney, executor, administrator, trustee or guardian, please
print your full title below the signature.
Date ____________
/
________________________________________________________
Shareholder sign here Co-owner sign here
<PAGE> 58
ARK FUNDS
OAKS, PENNSYLVANIA 19456
THE GOVETT FUNDS, INC.
250 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
STATEMENT OF ADDITIONAL INFORMATION
(SPECIAL MEETING OF SHAREHOLDERS OF THE GOVETT FUNDS, INC.)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Prospectus/Proxy Statement dated June 30, 2000 for
the Special Meeting of Shareholders of Govett Funds to be held on August 4,
2000. Copies of the Prospectus/Proxy Statement may be obtained without charge by
calling Govett Funds at 1-800-821-0803. Unless otherwise indicated, capitalized
terms used herein and not otherwise defined have the same meanings as are given
to them in the Prospectus/Proxy Statement.
Further information about the Acquiring Funds is contained in and
incorporated by reference to the ARK Funds' Statement of Additional Information
dated June 30, 2000 a copy of which is included herewith. The audited financial
statements and related independent auditor's report for the Acquiring Funds
contained in the Annual Report for the fiscal year ended April 30, 1999 are
hereby incorporated herein by reference. The unaudited financial statements for
the Acquiring Funds contained in the Semi-Annual Report for the six months ended
October 31, 1999 are incorporated by reference herein. No other parts of the
Annual Report and the Semi-Annual Report are incorporated by reference herein.
Further information about the Acquired Funds is contained in the Govett
Funds' Statement of Additional Information dated May 1, 2000, and is
incorporated herein by reference. The audited financial statements and related
independent auditor's report for the Acquired Funds contained in the Annual
Report for the fiscal year ended December 31, 1999 are hereby incorporated
herein by reference. No other parts of the Annual Report are incorporated by
reference herein.
The date of this Statement of Additional Information is June 30, 2000.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information......................................... 2
Pro Forma Financial Statements.............................. 2
</TABLE>
<PAGE> 59
GENERAL INFORMATION
The shareholders of the Govett Global Income Fund, Govett Smaller Companies
Fund, Govett Emerging Markets Equity Fund, and Govett International Equity Fund
of The Govett Funds, Inc. (collectively, the "Acquired Funds") are being asked
to approve or disapprove the Agreement and Plan of Reorganization dated as of
May 17, 2000 (the "Reorganization Agreement"), between ARK Funds and The Govett
Funds, Inc. ("Govett Funds") and the transactions contemplated thereby. The
Reorganization Agreement contemplates the transfer of the assets to, and the
assumption of the stated liabilities of the Acquired Funds by, the ARK Income
Portfolio, ARK Small-Cap Equity Portfolio, ARK Emerging Markets Equity
Portfolio, and ARK International Equity Selection Portfolio (or ARK
International Equity Portfolio), respectively, of ARK Funds (collectively the
"Acquiring Funds"), in exchange for full and fractional Retail Class A and
Institutional Class shares of the Acquiring Funds (the "Reorganizations"). The
Acquiring Funds shares received by each Acquired Fund will have an aggregate net
asset value equal to the aggregate net asset value of the shares of the Acquired
Funds that are outstanding at the Closing Date (as defined in the Reorganization
Agreement).
Following the exchange, the Acquired Funds will make a liquidating
distribution of the Acquiring Funds shares to their shareholders. Each
shareholder owning shares of an Acquired Fund at the Closing Date will receive
shares of the corresponding Acquiring Fund of equal value, plus the right to
receive any unpaid dividends and distributions that were declared before the
Closing Date on shares in the corresponding Acquired Fund.
The Special Meeting of shareholders of Govett Funds to consider the
Reorganization Agreement and the related transactions will be held at 3:00 p.m.,
Eastern Time, on August 4, 2000, at 25 South Charles Street -- 16th Floor,
Baltimore, Maryland 21201. For further information about the transaction, see
the Prospectus/ Proxy Statement.
PRO FORMA FINANCIAL STATEMENTS(1)
<TABLE>
<CAPTION>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
<S> <C>
Govett Smaller Companies Fund ARK Small-Cap Equity Portfolio
Govett International Equity Fund ARK International Equity Selection Portfolio
</TABLE>
---------------
(1) No Pro Forma financials are provided for two of the proposed reorganized
funds:
- Govett Global Income Fund (Acquired Fund) has assets that total less than
10% the total assets of ARK Income Portfolio (Acquiring Fund); and
- Govett Emerging Markets Equity Fund (Acquired Fund) is to be acquired by
ARK Emerging Markets Equity Portfolio, which is a shell portfolio
requiring no Pro Forma.
INTRODUCTION TO PROPOSED REORGANIZATION
OCTOBER 31, 1999
The accompanying unaudited Pro Forma Combining Schedule of Investments,
Statement of Assets and Liabilities, and Statement of Operations reflect the
accounts of Govett Smaller Companies Fund and ARK Small-Cap Equity Portfolio and
Govett International Equity Fund and ARK International Equity Selection
Portfolio, at October 31, 1999 and for the year then ended. These statements
have been derived from each fund's books and records utilized in calculating
daily net asset value at October 31, 1999.
2
<PAGE> 60
ARK SMALL-CAP EQUITY PORTFOLIO
PRO-FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
ARK SMALL-CAP
ARK SMALL-CAP GOVETT EQUITY PORTFOLIO
EQUITY PORTFOLIO SMALLER COMPANIES FUND ADJUSTMENTS PRO FORMA COMBINED
---------------- ---------------------- ------------------ -------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------ ------- -------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS -- 82.6%
BELGIUM -- 0.0%
Computer & Services
Dolmen Computer
Applications............. 1,200 21 (1,200) (21) 0 0
Retail
Colruyt S.A. .............. 12,000 658 (12,000) (658) 0 0
------ -------
679 0
------ -------
DENMARK -- 0.0%
Services
ISS International Service
System -- Class B........ 18,000 965 (18,000) (965) 0 0
------ -------
FINLAND -- 0.0%
Semi-Conductors/Instruments
Perlos OYJ................. 9,000 148 (9,000) (148) 0 0
------ -------
FRANCE -- 0.0%
Computer & Services
Cap Gemini Sogeti.......... 7,108 1,077 (7,108) (1,077) 0 0
------ -------
GERMANY -- 0.0%
Electrical & Electronics
Vivanco Gruppe AG.......... 25,400 369 (25,400) (369) 0 0
------ -------
ISRAEL -- 0.0%
Telecommunications
Forsoft Ltd. .............. 55,000 402 (55,000) (402) 0 0
------ -------
ITALY -- 0.0%
Publishing
Class Editori.............. 140,000 1,180 (140,000) (1,180) 0 0
------ -------
JAPAN -- 0.0%
Drugs
Kyorin Pharmaceutical Co... 52,000 1,890 (52,000) (1,890) 0 0
Electrical & Electronics
Fuji Soft ABC
Incorporated............. 18,700 1,712 (18,700) (1,712) 0 0
Meitic Corp................ 44,800 1,680 (44,800) (1,680) 0 0
Services
HIS Co Limited............. 51,350 2,044 (51,350) (2,044) 0 0
------ -------
Total Japan................ 7,326 0
------ -------
NETHERLANDS -- 0.0%
Electronic Components &
Instruments
Magnus Holding NV.......... 110,177 337 (110,177) (337) 0 0
------ -------
</TABLE>
3
<PAGE> 61
<TABLE>
<CAPTION>
ARK SMALL-CAP
ARK SMALL-CAP GOVETT EQUITY PORTFOLIO
EQUITY PORTFOLIO SMALLER COMPANIES FUND ADJUSTMENTS PRO FORMA COMBINED
---------------- ---------------------- ------------------ -------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------ ------- -------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NORWAY -- 0.0%
Computer Software
Merkantildata ASA.......... 55,300 469 (55,300) (469) 0 0
------ -------
UNITED KINGDOM -- 0.0%
Electrical & Electronics
RM PLC..................... 161,033 1,656 (161,033) (1,656) 0 0
Electronic Components &
Instruments
Critchley Group PLC........ 98,800 711 (98,800) (711) 0 0
Health & Personal Care
Nestor Healthcare Group
PLC...................... 105,991 1,037 (105,991) (1,037) 0 0
Seton Scholl Healthcare
PLC...................... 90,000 962 (90,000) (962) 0 0
Transportation
Metroline PLC.............. 130,755 331 (130,755) (331) 0 0
------ -------
Total United Kingdom....... 4,697 0
------ -------
SPAIN -- 0.0%
Computers & Services
Indra Systems SA........... 22,300 234 (22,300) (234) 0 0
Financial Services
NM Hotels SA............... 50,000 565 (50,000) (565) 0 0
Food & Beverage
Superdiplo SA.............. 25,000 458 (25,000) (458) 0 0
------ -------
Total Spain................ 1,257 0
------ -------
THAILAND -- 0.0%
Telecommunications
Total Access
Communications........... 367,000 888 (367,000) (888) 0 0
------ -------
UNITED STATES -- 82.6%
BANKS/FINANCE -- 4.8%
Cit Group Inc Cl A......... 30,000 716 30,000 716
E-Stamp.................... 1,600 37 1,600 37
Illuminet Holdings*........ 11,000 511 11,000 511
Interwoven*................ 5,500 431 5,500 431
First Tennessee National... 25,000 850 25,000 850
Paine Webber Group......... 20,000 815 20,000 815
People's Heritage Financial
Group.................... 50,000 950 50,000 950
Waddell & Reed Financial
Associates............... 40,000 960 40,000 960
------- ------ -------
Total Banks/Finance........ 979 4,291 5,270
------- ------ -------
BROADCASTING, NEWSPAPERS &
ADVERTISING -- 5.6%
Freeshop.com*.............. 45,000 762 45,000 762
Radio Unica
Communications*.......... 12,500 358 12,500 358
Spanish Broadcasting
Systems, Cl A*........... 11,000 293 11,000 293
</TABLE>
4
<PAGE> 62
<TABLE>
<CAPTION>
ARK SMALL-CAP
ARK SMALL-CAP GOVETT EQUITY PORTFOLIO
EQUITY PORTFOLIO SMALLER COMPANIES FUND ADJUSTMENTS PRO FORMA COMBINED
---------------- ---------------------- ------------------ -------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------ ------- -------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
True North Communications.. 10,000 403 25,000 1,008 35,000 1,411
Young & Rubicam............ 30,000 1,372 44,000 2,013 74,000 3,385
------- ------ -------
Total Broadcasting,
Newspapers &
Advertising.............. 3,188 3,021 6,209
------- ------ -------
BUILDING & CONSTRUCTION --
1.3%
Stolt Comex Seaway S.A.,
ADR*..................... 75,000 802 60,000 641 135,000 1,443
------- ------ -------
BUILDING & CONSTRUCTION
SUPPLIES -- 0.9%
Mobile Mini*............... 45,000 982 45,000 982
------- -------
CHEMICALS -- 1.4%
Airgas*.................... 73,400 697 73,400 697
Wellman Inc. .............. 55,000 828 55,000 828
------ -------
Total Chemicals............ 1,525 1,525
------ -------
CLOTHING & APPAREL -- 0.4%
Cutter Buck Inc. .......... 30,000 493 30,000 493
------ -------
COMMUNICATIONS
EQUIPMENT -- 11.4%
Altigen Communications*.... 30,000 356 25,000 297 55,000 653
CD Radio *................. 25,000 637 25,000 637
CIENA*..................... 30,000 1,057 30,000 1,058 60,000 2,115
Comverse Technology........ 19,000 2,157 19,000 2,157
Digital Microwave*......... 60,000 892 60,000 892
Digital Lightwave*......... 30,000 518 30,000 518
Metricom*.................. 10,000 439 10,000 439
Microcell
Telecommunications*...... 75,000 1,425 75,000 1,425
Powerwave Technologies*.... 10,000 651 10,000 651
Sawtek*.................... 15,000 615 34,000 1,394 49,000 2,009
Scientific-Atlanta Inc..... 20,000 1,145 20,000 1,145
------- ------ -------
Total Communications
Equipment................ 6,590 6,051 12,641
------- ------ -------
COMPUTER SOFTWARE -- 2.8%
Legato Systems*............ 15,000 806 30,000 1,613 45,000 2,419
US Internetworking......... 20,000 666 20,000 666
------- ------ -------
Total Computer Software.... 806 2,279 3,085
------- ------ -------
COMPUTERS & SERVICES --5.5%
Electronics for Imaging.... 36,000 1,451 36,000 1,451
Emulex*.................... 14,600 2,277 14,600 2,277
Jabil Circuit*............. 40,000 2,090 40,000 2,090
Jupiter Communications*.... 500 17 500 17
Online Resources &
Communications Corp...... 25,000 266 25,000 266
------- ------ -------
Total Computers &
Services................. 2,294 3,807 6,101
------- ------ -------
</TABLE>
5
<PAGE> 63
<TABLE>
<CAPTION>
ARK SMALL-CAP
ARK SMALL-CAP GOVETT EQUITY PORTFOLIO
EQUITY PORTFOLIO SMALLER COMPANIES FUND ADJUSTMENTS PRO FORMA COMBINED
---------------- ---------------------- ------------------ ------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------ ------- -------- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DRUGS -- 0.1%
Supergen*................... 4,130 116 4,130 116
------- -------
FOOD, BEVERAGE & TOBACCO --
1.4%
Interstate Bakeries......... 25,000 506 25,000 506
Suiza Foods Corp............ 30,000 1,082 30,000 1,082
------ -------
Total Food, Beverage &
Tobacco................... 1,588 1,588
------ -------
HOUSEHOLD PRODUCTS -- 1.1%
Dial Corp................... 50,000 1,169 50,000 1,169
INTERNET SERVICES -- 3.8%
Agile Software*............. 20,000 1,960 20,000 1,960
24/7 Media*................. 20,000 1,296 22,000 950 42,000 2,246
------- ------ -------
Total Internet Services..... 3,256 950 4,206
------- ------ -------
MACHINERY -- 0.4%
Kulicke & Soffa
Industries*............... 15,000 442 15,000 442
-------
MEDICAL INSTRUMENTS -- 0.5%
Biomet...................... 20,000 603 20,000 603
------ -------
MISCELLANEOUS BUSINESS
SERVICES -- 10.4%
Breakaway Solutions*........ 500 27 500 27
BSQUARE*.................... 1,000 40 1,000 40
Data Return................. 1,000 15 1,000 15
Flycast Communications*..... 25,000 1,259 25,000 1,259
Kana Communications*........ 10,500 883 10,500 883
Marimba*.................... 50,500 1,439 50,500 1,439
Netcentives *............... 250 4 250 4
Puma Technology*............ 25,000 925 25,000 925
Southeby's Holdings, Cl A... 35,000 1,006 35,000 1,006
Splitrock Services*......... 40,000 875 40,000 875
Tibco Software*............. 37,500 1,463 37,500 1,463
Trend Micro*................ 80,000 1,580 80,000 1,580
USWeb*...................... 35,000 1,356 35,000 1,356
Ziplink*.................... 50,000 594 50,000 594
------- ------ -------
Total Miscellaneous Business
Services.................. 10,460 1,006 11,466
------- ------ -------
PETROLEUM & FUEL PRODUCTS --
0.7%
Chieftan International*..... 21,700 415 21,700 415
Tuboscope*.................. 30,000 334 30,000 334
------- -------
Total Petroleum & Fuel
Products.................. 749 749
------- -------
PROFESSIONAL SERVICES --0.8%
Consolidated Graphics*...... 5,500 110 5,500 110
Razorfish*.................. 10,000 738 10,000 738
------- -------
Total Professional
Services.................. 848 848
------- -------
</TABLE>
6
<PAGE> 64
<TABLE>
<CAPTION>
ARK SMALL-CAP
ARK SMALL-CAP GOVETT EQUITY PORTFOLIO
EQUITY PORTFOLIO SMALLER COMPANIES FUND ADJUSTMENTS PRO FORMA COMBINED
---------------- ---------------------- ------------------ ------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------ ------- -------- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RETAIL--1.5%
Gaiam, Cl A*................ 9,700 62 9,700 62
Linens n Things Inc. ....... 25,000 994 25,000 994
Office Depot................ 46,500 578 46,500 578
------- ------ -------
Total Retail................ 62 1,572 1,634
------- ------ -------
SEMI-CONDUCTORS/
INSTRUMENTS -- 9.4%
Amkor Technology*........... 30,000 606 30,000 606
Cymer*...................... 15,000 554 15,000 554
Cypress Semiconductor*...... 30,000 767 30,000 767
Dallas Semiconductor........ 10,000 589 10,000 589
Fairchild Semiconductor
International, Cl A*...... 25,000 631 25,000 631
International Rectifier..... 50,000 972 50,000 972
JNI......................... 6,500 347 6,500 347
MKS Instruments Inc. ....... 37,500 788 37,500 788
National Semiconductor...... 20,000 599 20,000 599
SDL*........................ 10,000 1,233 10,000 1,233
Semtech*.................... 30,000 1,149 30,000 1,149
Silicon Image*.............. 500 22 500 22
Teradyne.................... 15,000 577 15,000 577
Xilinx*..................... 20,000 1,572 20,000 1,572
------- ------ -------
Total Semi-Conductors/
Instruments............... 6,870 3,536 10,406
------- ------ -------
TELEPHONES &
TELECOMMUNICATIONS --
16.6%
Airgate PCS*................ 25,800 1,290 25,800 1,290
Clearnet, Cl A*............. 80,000 1,760 80,000 1,760
ITC Deltacom*............... 15,000 360 15,000 360
ITXC........................ 9,000 407 9,000 407
Pacific Gateway Exchange
Inc. ..................... 25,000 569 25,000 569
Pairgain Technologies
Inc. ..................... 15,000 185 15,000 185
Rambus*..................... 8,000 541 8,000 541
RCN*........................ 15,000 718 15,000 718
Rural Cellular, Cl A*....... 35,000 2,107 25,000 1,505 60,000 3,612
Shared Technologies
Cellular*................. 50,000 463 50,000 463
Triton PCS Holdings, Cl
A*........................ 10,200 360 10,200 360
Voicestream Wireless*....... 20,000 1,975 24,000 2,370 44,000 4,345
Western Wireless, Cl A*..... 30,000 1,586 27,500 1,454 57,500 3,040
Winstar Communications
Inc....................... 20,000 776 20,000 776
------- ------ -------
Total Telephones &
Telecommunications........ 11,567 6,859 18,426
------- ------ -------
</TABLE>
7
<PAGE> 65
<TABLE>
<CAPTION>
ARK SMALL-CAP
ARK SMALL-CAP GOVETT EQUITY PORTFOLIO
EQUITY PORTFOLIO SMALLER COMPANIES FUND ADJUSTMENTS PRO FORMA COMBINED
---------------- ---------------------- ------------------ ------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------ ------- -------- ------- -------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WHOLESALE -- 1.4%
Baltimore Technologies*..... 15,000 488 15,000 488
Price Communications*....... 46,500 1,011 46,500 1,011
------- -------
Total Wholesale............. 1,499 1,499
======= =======
Total United States......... 51,510 39,391 90,901
======= ====== =======
Total Common Stocks (Cost
$40,744, $44,930 and
$69,541 respectively)..... 51,510 59,185 (19,794) 90,901
======= ====== ======= =======
REPURCHASE AGREEMENT -- 1.6%
First Boston (5.330%, dated
10/29/99, matures
11/01/99, repurchase price
$1,819,185; collateralized
by U.S. Gov't Agency
Instruments: total market
value $1,873,924)) (Cost
$1,818, 0 and $1,818
respectively)............. 1,818 1,818 1,818 1,818
Total Investments -- 84.2%
(Cost $42,562, $44,930 and
$71,359 respectively)..... 53,328 59,185 (19,794) 92,719
------- ------ ------- -------
Other Assets and
Liabilities,
Net -- 15.8%.............. (3,210) 767 19,794 17,351
------- ------ ------- -------
Total Net Assets --100.0%... 50,118 59,952 0 110,070
======= ====== ======= =======
</TABLE>
---------------
* Non-income producing security
ADR-American Depository Receipt
Cl-Class
See Notes to Pro Forma Combining Financial Statements
8
<PAGE> 66
ARK SMALL-CAP EQUITY PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999 (UNAUDITED)
(IN 000'S)
<TABLE>
<CAPTION>
ARK
SMALL-CAP
ARK EQUITY
SMALL- GOVETT PORTFOLIO
CAP SMALLER PRO
EQUITY COMPANIES FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Identified cost of securities............................. $ 42,562 $ 44,930 $(16,133) $ 71,359
Net unrealized gains on securities........................ 10,766 14,255 (3,661) 21,360
--------- --------- -------- ---------
Market value of securities................................ 53,328 59,185 (19,794) 92,719
Cash...................................................... 0 1,063 1,063
Foreign currency, at value (cost $0, $12, $0
respectively)........................................... 11 11
Receivable for securities sold............................ 2,629 665 19,794 23,088
Receivable from Adviser................................... 0 13 13
Receivable for Fund shares sold........................... 9 0 9
Dividends and interest receivable......................... 26 26
Receivable for closed forward foreign currency exchange
contracts............................................... 0 0 --
Unrealized gains on forward foreign currency exchange
contracts............................................... 0 0 --
Receivable for daily variation margin on open futures
contracts............................................... 0 0 --
Deferred organization expenses............................ 0 0 --
Receivable from related parties........................... 0 0 --
Prepaid expenses and other assets......................... 14 14
--------- --------- -------- ---------
Total assets............................................ 55,966 60,977 0 116,943
--------- --------- -------- ---------
LIABILITIES
Payable for securities purchased.......................... 5,781 5,781
Payable for Fund shares redeemed.......................... 24 649 673
Advisory fee payable...................................... 98 98
Distribution Plan expenses payable........................ 51 51
Accrued expenses and other liabilities.................... 43 227 270
--------- --------- -------- ---------
Total liabilities....................................... 5,848 1,025 0 6,873
--------- --------- -------- ---------
NET ASSETS.............................................. $ 50,118 $ 59,952 $ -- $ 110,070
========= ========= ======== =========
NET ASSETS REPRESENTED BY
Paid-in capital-Institutional Class....................... $ 24,597 $ -- $ 24,597
Paid-in capital-Retail Class A............................ $ 2,389 $ 76,593 $ 78,982
Undistributed (overdistributed) net investment income or
loss.................................................... 0 13,250 13,250
Accumulated net realized gains or losses on securities and
foreign currency transactions........................... 12,366 (44,145) 3,661 (28,118)
Net unrealized gains on securities and foreign currency
transactions............................................ 10,766 14,254 (3,661) 21,359
--------- --------- -------- ---------
TOTAL NET ASSETS............................................ $ 50,118 $ 59,952 $ -- $ 110,070
========= ========= ======== =========
NET ASSETS CONSISTS OF
Class I................................................... $ 46,509 $ 46,509
Class A................................................... 3,609 59,952 63,561
--------- --------- -------- ---------
TOTAL NET ASSETS............................................ $ 50,118 $ 59,952 $ -- $ 110,070
========= ========= ======== =========
SHARES OUTSTANDING
Class I................................................... 2,424,296 2,424,296
Class A................................................... 189,198 2,646,172 496,748 3,332,118
NET ASSET VALUE PER SHARE
Class I................................................... $ 19.18 $ -- $ 19.18
========= ========= ======== =========
Class A................................................... $ 19.08 $ 22.66 $ 19.08
========= ========= ======== =========
Class A (offering price at 4.75% sales load).............. $ 20.03 $ 20.03
========= ========= ======== =========
</TABLE>
See Notes to Pro Forma Combining Financial Statements
9
<PAGE> 67
ARK SMALL-CAP EQUITY PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999 (UNAUDITED)
(IN 000'S)
<TABLE>
<CAPTION>
ARK SMALL-CAP
ARK GOVETT EQUITY
SMALL-CAP SMALLER PORTFOLIO
EQUITY COMPANIES PRO FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
--------- --------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends...................................... $ 45 $ 293 $ 338
Interest....................................... 115 16 131
------- ------- ----- -------
TOTAL INVESTMENT INCOME.......................... 160 309 469
------- ------- ----- -------
EXPENSES
Administrator Fees............................. 44 299 (223)(1) 120
Investment Advisory Fees....................... 269 588 (117)(2) 740
Custodian Fees................................. 29 30 38(3) 97
Transfer Agency Fees........................... 4 447 (441)(4) 10
Professional Fees.............................. 1 68 (33)(5) 36
Registration Fees.............................. 11 62 (48)(6) 25
Distribution Fees
Retail Class A.............................. 10 204 33(7) 247
Printing Fees.................................. 4 -- 4
Trustee Fees................................... 1 33 (33)(8) 1
Miscellaneous Fees............................. 2 44 (44)(9) 2
Overdraft expense.............................. 57 (57)(3) --
Shareholder Servicing Fees..................... -- 147(10) 198
Institutional Class......................... 47
Retail Class A.............................. 4
------- ------- ----- -------
Total expenses................................... 426 1,832 (778) 1,480
Fee waivers and reimbursements......... (19) (436) 304(11) (151)
------- ------- ----- -------
Net expenses................................... 407 1,396 (474) 1,329
------- ------- ----- -------
Interest....................................... 11 11
------- ------- ----- -------
NET INVESTMENT INCOME OR LOSS............... $ (247) $(1,098) $ 474 $ (871)
------- ------- ----- -------
NET REALIZED AND UNREALIZED GAINS OR LOSSES ON
SECURITIES AND FOREIGN CURRENCY TRANSACTIONS
Net realized gains or losses on:
Securities.................................. $13,457 $14,491 $27,948
Foreign Currency............................ -- (58) (58)
------- ------- ----- -------
Net realized gains or losses on securities
and foreign currency transactions......... 13,457 14,433 27,890
------- ------- ----- -------
Net change in unrealized gains or losses on
securities and foreign currency
transactions.............................. 10,458 13,975 24,433
------- ------- ----- -------
Net realized and unrealized gains or losses
on securities and foreign currency
transactions.............................. 23,915 28,408 52,323
------- ------- ----- -------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ $23,668 $27,310 $ 474 $51,452
------- ------- ----- -------
</TABLE>
---------------
(1) Adjustment to reflect administrator fees for the combined fund based on the
administrator fee rates in place for the acquiring fund during the period.
(2) Adjustment to reflect advisory fees for the combined fund based on the
advisory fee rates in place for the acquiring fund during the period.
(3) Adjustment to reflect custody fees for the combined fund based on the
custody fee rates (and overdraft fees) in place for the acquiring fund
during the period.
10
<PAGE> 68
(4) Adjustment to reflect transfer agency fees for the combined fund based on
the transfer agency fee rates in place for the acquiring fund during the
period.
(5) Adjustment to reflect the reduction in professional services fees.
(6) Adjustment to reflect the reduction in registration and filing fees.
(7) Adjustment to reflect distribution fees for the combined fund based on the
distribution fee rates in place for the acquiring fund during the period.
(8) Adjustment to reflect the reduction in trustee fees.
(9) Adjustment to reflect the reduction in miscellaneous fees.
(10) Adjustment to reflect shareholder service fees for the combined fund based
on the shareholder service fee rates in place for the acquiring fund during
the period.
(11) Adjustment to reflect waivers necessary to limit overall fund expenses to
the acquiring fund's contractual ** limit of 1.44% and 1.26%, on an annual
basis, of the average daily net assets of Retail Class A and Institutional
Class respectively.
** The acquiring fund's adviser has contractually agreed to waive fees and
reimburse expenses in order to keep the total operating expenses from
exceeding the expressed limits for the period ended 8/31/01.
See Notes to Pro Forma Combining Financial Statements
11
<PAGE> 69
ARK SMALL-CAP EQUITY PORTFOLIO
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
OCTOBER 31, 1999 (UNAUDITED)
1. Basis of Combination -- The Pro Forma Combining Schedule of Investments, Pro
Forma Combining Statement of Assets and Liabilities and the related Pro Forma
Combining Statement of Operations ("Pro Forma Statements"), reflect the
accounts of ARK Small-Cap Equity Portfolio ("Small Cap Portfolio") and Govett
Smaller Companies Fund ("Smaller Companies Fund") at October 31, 1999 and for
the year then ended.
The Pro Forma Statements give effect to the proposed Agreement and Plan of
Reorganization (the "Reorganization") to be submitted to shareholders of
Smaller Companies Fund. The Reorganization provides for the acquisition of
all assets and the identified liabilities of Smaller Companies Fund by Small
Cap Portfolio, in exchange for Class A shares of Small Cap Portfolio.
Thereafter, there will be a distribution of Class A shares of Small Cap
Portfolio to the respective shareholders of Smaller Companies Fund in
liquidation and subsequent termination thereof. As a result of the
Reorganization, the shareholders of Smaller Companies Fund will become the
owners of that number of full and fractional Class A shares of Small Cap
Portfolio having an aggregate net asset value equal to the aggregate net
asset value of their shares of Smaller Companies Fund as of the close of
business immediately prior to the date that Smaller Companies Fund net assets
are exchanged for Class A shares of Small Cap Portfolio.
The Pro Forma Combining Financial Statements reflect the expenses of each
Fund in carrying out its obligations under the Reorganization as though the
merger occurred at the beginning of the respective periods presented.
The information contained herein is based on the experience of each Fund for
the respective periods then ended and is designed to permit shareholders of
the consolidating mutual funds to evaluate the financial effects of the
proposed Reorganization. The expenses of Smaller Companies Fund in connection
with the Reorganization (including the cost of any proxy soliciting agents)
will be borne by AIB Govett, Inc.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the Statement
of Additional Information.
2. Shares of Beneficial Interest -- The Pro Forma net asset values per share
assume the issuance of Class A shares of Small Cap Portfolio which would have
been issued at October 31, 1999 in connection with the proposed
Reorganization. Shareholders of Smaller Companies Fund would receive Class A
shares of Small Cap Portfolio based on conversion ratios determined on
October 31, 1999. The conversion ratios are calculated by dividing the net
asset value of Smaller Companies Fund by the net asset value per share of the
Class A shares of Small Cap Portfolio.
3. Pro Forma Operations -- The Pro Forma Combining Statement of Operations
assumes similar rates of gross investment income for the investments of each
Fund. Accordingly, the combined gross investment income is equal to the sum
of each Fund's gross investment income. Pro Forma operating expenses include
the actual expenses of the Funds. The pro forma combined expenses were
calculated by applying the Small Cap Portfolio expense rates to the pro forma
combined average daily net assets of the two funds for the twelve months
ended October 31, 1999. The adjustments reflect those amounts needed to
adjust the combined expenses to these rates. The non-contractual expenses
were adjusted to approximate the actual expenses of the combined fund as of
October 31, 1999.
12
<PAGE> 70
ARK INTERNATIONAL EQUITY PORTFOLIO
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
ARK INTERNATIONAL
ARK INTERNATIONAL GOVETT EQUITY PORTFOLIO
EQUITY SELECTION INTERNATIONAL PRO FORMA
PORTFOLIO EQUITY FUND ADJUSTMENTS COMBINED
----------------- ------------------ ------------------ ------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------- ------- --------- ------ -------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MUTUAL FUNDS -- 0.0%............
American Advantage International
Equity Fund................... 96,612 1,870 (96,612) (1,870) 0 0
American Century International
Growth Fund................... 181,893 2,054 (181,893) (2,054) 0 0
American Funds Europacific
Growth Fund................... 65,572 2,360 (65,572) (2,360) 0 0
Artisan International Fund...... 96,809 2,025 (96,809) (2,025) 0 0
BT Institutional International
Equity Fund................... 131,070 1,911 (131,070) (1,911) 0 0
Federated International Small
Company Fund, Class A......... 31,972 924 (31,972) (924) 0 0
Fidelity Diversified
International Fund............ 102,735 2,191 (102,735) (2,191) 0 0
Glenmede International
Institutional Portfolio....... 112,557 2,006 (112,557) (2,006) 0 0
Harbor International Fund....... 48,854 1,988 (48,854) (1,988) 0 0
Janus Overseas Fund............. 89,130 2,258 (89,130) (2,258) 0 0
Pilgrim International Small Cap
Growth Fund, Class Q.......... 9,773 310 (9,773) (310) 0 0
Putnam International Growth
Fund.......................... 95,198 2,283 (95,198) (2,283) 0 0
Scudder International Fund...... 36,709 2,145 (36,709) (2,145) 0 0
Scudder Japan Fund.............. 127,437 2,020 (127,437) (2,020) 0 0
Templeton Foreign Fund, Class
I............................. 117,157 1,165 (117,157) (1,165) 0 0
UMB Scout Worldwide Fund........ 50,765 1,079 (50,765) (1,079) 0 0
------- ------- ------
Total Mutual Funds (Cost
$24,514, $0, and $0
respectively)................. 28,589 (28,589) 0
------- ------- ------
COMMON STOCKS -- 38.7%
BRAZIL -- 1.1%
Companhia Vale do Rio Doce...... 1,400 27 1,400 27
Companhia Vale do Rio Doce
ADR........................... 4,660 91 4,660 91
Pao de Acucar ADR............... 3,930 86 3,930 86
San Paolo....................... 10,780 140 10,780 140
Telecom de Sao Paulo SA......... 1,078,000 101 1,078,000 101
Telecentro Sul Participacoes.... 9,021,000 108 9,021,000 108
------ ------
Total Brazil (Cost $592)........ 553 553
------ ------
CHINA -- 0.2%
Huaneng Power Internaltional --
ADR (cost $92)................ 5,900 72 5,900 72
------ ------
FINLAND -- 1.3%
Nokia OYJ -- Cl. A (cost
$123)......................... 6,511 745 6,511 745
------ ------
</TABLE>
13
<PAGE> 71
<TABLE>
<CAPTION>
ARK INTERNATIONAL
ARK INTERNATIONAL GOVETT EQUITY PORTFOLIO
EQUITY SELECTION INTERNATIONAL PRO FORMA
PORTFOLIO EQUITY FUND ADJUSTMENTS COMBINED
----------------- ------------------ ------------------ ------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------- ------- --------- ------ -------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FRANCE -- 5.8%
Accor SA........................ 1,137 256 1,137 256
Axa............................. 2,975 420 2,975 420
Banque Nationale de Paris....... 3,040 264 3,040 264
Groupe Danone................... 974 248 974 248
Lafarge......................... 1,624 156 1,624 156
L Air Liquide................... 641 99 641 99
Rhone Poulenc Cl. A............. 2,055 115 2,055 115
Suez Lyonnaise des Euax......... 840 136 840 136
Total Fina SA Cl. B............. 3,761 508 3,761 508
Valeo SA........................ 867 62 867 62
Vivendi......................... 7,963 604 7,963 604
------ ------
Total France (Cost $2,577)...... 2,868 2,868
------ ------
GERMANY -- 3.1%
Bayerische Hypo Vereinsbank..... 2,285 149 2,285 149
Celanese AG..................... 348 5 348 5
Deutsche Bank AG................ 4,835 347 4,835 347
Hoechst AG...................... 3,133 137 3,133 137
Mannesmann AG................... 2,916 450 2,916 450
Siemens AG...................... 2,598 232 2,598 232
Viag AG......................... 4,030 75 4,030 75
Volkswagen AG................... 2,228 131 2,228 131
------ ------
Total Germany (Cost $1,321)..... 1,526 1,526
------ ------
HONG KONG -- 0.5%
Hutchison Whampoa............... 14,000 141 14,000 141
New World Development Co. ...... 56,000 106 56,000 106
------ ------
Total Hong Kong (Cost $208)..... 247 247
------ ------
HUNGARY -- 0.2%
Matav Tr-ADR (cost $111)........ 4,000 115 4,000 115
------ ------
INDIA -- 0.4%
Mahangar Tele Nigam............. 8,000 66 8,000 66
State Bank of India............. 8,250 110 8,250 110
------ ------
Total India (Cost $150) 176 176
------ ------
ISRAEL -- 0.0%
Partner Communications ADR...... 1,945 31 1,945 31
------ ------
ITALY -- 0.3%
Generali (cost $168)............ 4,843 155 4,843 155
------ ------
JAPAN -- 8.5%
The Bank of
Tokyo -- Mitsubishi........... 8,000 133 8,000 133
Fuji Bank....................... 5,000 69 5,000 69
Fuji Heavy Industries Ltd. ..... 10,000 85 10,000 85
Fujistu General................. 9,000 272 9,000 272
Hitachi Ltd. ................... 19,000 206 19,000 206
Honda Motor..................... 1,000 42 1,000 42
Ito Yokado Company Ltd. ........ 4,000 320 4,000 320
</TABLE>
14
<PAGE> 72
<TABLE>
<CAPTION>
ARK INTERNATIONAL
ARK INTERNATIONAL GOVETT EQUITY PORTFOLIO
EQUITY SELECTION INTERNATIONAL PRO FORMA
PORTFOLIO EQUITY FUND ADJUSTMENTS COMBINED
----------------- ------------------ ------------------ ------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------- ------- --------- ------ -------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Matsushita Electric
Industries.................... 10,000 211 10,000 211
Matsushita Heavy Industries
Ltd. ......................... 37,000 145 37,000 145
Sakura Bank..................... 4,000 34 4,000 34
Nippon Express.................. 26,000 184 26,000 184
Nippon Steel Corp. ............. 95,000 241 95,000 241
Ricoh Corp Ltd. ................ 10,000 163 10,000 163
Sekisui House Ltd. ............. 12,000 130 12,000 130
Shin-Etsu Chemical Co. ......... 7,000 289 7,000 289
Sony Corp. ..................... 1,600 249 1,600 249
Sumitomo Bank................... 9,000 145 9,000 145
Sumitomo Chemical............... 43,000 276 43,000 276
Sumitomo Marine & Fire.......... 22,000 170 22,000 170
Takeda Chemical Industries...... 5,000 287 5,000 287
Tokyo Marine & Fire Insurance... 9,000 118 9,000 118
Toppan Printing................. 9,000 110 9,000 110
Mazda Motor..................... 21,000 114 21,000 114
Promise Co Ltd. 3,000 201 3,000 201
------ ------
Total Japan (Cost $3,221)....... 4,194 4,194
------ ------
KOREA -- 1.2%
Korea Electric Power Corp....... 7,800 123 7,800 123
Samsung Electronics GDS......... 5,780 338 5,780 338
Samsung Electronics New GDS..... 1,814 151 1,814 151
------ ------
Total Korea (Cost $236)......... 612 612
------ ------
MEXICO -- 0.8%
Cifra S.A. Ser C................ 106,100 162 106,100 162
Telefonos de Mexico ADR......... 2,850 244 2,850 244
------ ------
Total Mexico (Cost $245)........ 406 406
------ ------
NETHERLANDS -- 3.0%
ABN-Amro Holdings NV............ 48 1 48 1
Equant NV 621 60 621 60
Fortis NV....................... 4,964 171 4,964 171
Henkel KGAA..................... 1,930 131 1,930 131
ING Groep NV.................... 4,751 280 4,751 280
Koninklijke Ahold NV............ 9,236 284 9,236 284
Royal Dutch Petroleum........... 917 55 917 55
United Pan-Europe Comm NV....... 1,650 127 1,650 127
VNU Ver Ned Uitgevers........... 11,229 380 11,229 380
------ ------
Total Netherlands (Cost
$1,254)....................... 1,489 1,489
------ ------
PHILIPPINES -- 0.1%
Philippines Long Distance
Telephone ADR (cost $90)...... 3,100 64 3,100 64
------ ------
SOUTH AFRICA -- 0.2%
Edgars Stores Ltd. ............. 314 3 314 3
South African Breweries PLC..... 8,600 75 8,600 75
------ ------
Total South Africa (Cost $85)... 78 78
------ ------
</TABLE>
15
<PAGE> 73
<TABLE>
<CAPTION>
ARK INTERNATIONAL
ARK INTERNATIONAL GOVETT EQUITY PORTFOLIO
EQUITY SELECTION INTERNATIONAL PRO FORMA
PORTFOLIO EQUITY FUND ADJUSTMENTS COMBINED
----------------- ------------------ ------------------ ------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------- ------- --------- ------ -------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SPAIN -- 0.1%
Amadeus Global Travel Dist.
(cost $41).................... 6,600 40 6,600 40
------ ------
SWEDEN -- 0.4%
Atlas Copco AB.................. 4,364 115 4,364 115
Sandvik AB Cl. B................ 2,130 55 2,130 55
------ ------
Total Sweden (Cost $170)........ 170 170
------ ------
SWITZERLAND -- 2.2%
Nestle SA....................... 92 177 92 177
Novartis AG..................... 156 233 156 233
Roche Holding AG................ 13 156 13 156
Swisscom AG..................... 430 131 430 131
UBS AG.......................... 732 213 732 213
Zurich Allied AG................ 247 140 247 140
------ ------
Total Switzerland (Cost
$1,082)....................... 1,050 1,050
------ ------
TAIWAN -- 0.6%
Asustek Computer Inc. - GDR
(cost $150)................... 21,021 296 21,021 296
------ ------
THAILAND -- 0.2%
Thai Farmer's Bank (cost $96)... 55,000 78 55,000 78
------ ------
TURKEY -- 0.2%
Yapi Ve Kredi Bankasi AS
(cost $90).................... 7,812,000 114 7,812,000 114
------ ------
UNITED KINGDOM -- 8.3%
Alpha Credit Bank............... 2,542 194 2,542 194
Allied Domenq PLC............... 5,501 31 5,501 31
Allied Zurich PLC............... 8,041 97 8,041 97
Astrazeneca PLC................. 4,364 197 4,364 197
Barclays PLC.................... 7,823 239 7,823 239
Barrat Developments PLC......... 14,390 56 14,390 56
BP Amoco PLC.................... 17,132 166 17,132 166
British American Tobacco PLC.... 9,706 64 9,706 64
British Energy PLC.............. 10,028 68 10,028 68
British Telecom PLC............. 4,746 86 4,746 86
Commercial Union PLC............ 7,478 109 7,478 109
Cookson Group PLC............... 14,500 45 14,500 45
Diageo PLC...................... 12,650 128 12,650 128
Energis PLC..................... 2,790 89 2,790 89
Eircom PLC...................... 21,600 90 21,600 90
General Electric Company PLC.... 9,500 103 9,500 103
Glaxo Welcome PLC............... 9,775 289 9,775 289
Granada Group PLC............... 12,998 103 12,998 103
Halifax PLC..................... 9,056 116 9,056 116
Invensys PLC.................... 27,399 135 27,399 135
Kelda Group PLC................. 10,263 62 10,263 62
Lloyds TSB Group PLC............ 20,539 285 20,539 285
</TABLE>
16
<PAGE> 74
<TABLE>
<CAPTION>
ARK INTERNATIONAL
ARK INTERNATIONAL GOVETT EQUITY PORTFOLIO
EQUITY SELECTION INTERNATIONAL PRO FORMA
PORTFOLIO EQUITY FUND ADJUSTMENTS COMBINED
----------------- ------------------ ------------------ ------------------
MARKET MARKET MARKET MARKET
VALUE VALUE VALUE VALUE
SHARES (000) SHARES (000) SHARES (000) SHARES (000)
------- ------- --------- ------ -------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
National Westminster Bank....... 8,763 199 8,763 199
Prudential Corp PLC............. 13,050 205 13,050 205
Railtrack Group PLC............. 9,051 183 9,051 183
Royal Sun & Alliance Insurance
Group......................... 6,623 45 6,623 45
Severn Trent PLC................ 7,054 101 7,054 101
Smithkline Beecham PLC.......... 13,937 180 13,937 180
Smiths Industries PLC........... 1,800 24 1,800 24
Unilever PLC.................... 13,346 124 13,346 124
Vodafone Airtouch PLC........... 56,385 262 56,385 262
------ ------
Total United Kingdom
(Cost $3,680)................. 4,075 4,075
------ ------
Total Common Stocks
(cost $0, $15,740 and $15,740
respectively)................. 19,154 19,154
------ ------
REPURCHASE AGREEMENTS -- 3.1%
(repurchase price $1,547,769
(collateralized by First
Boston 5.330%, dated 10/29/99,
matures 11/01/99, U.S. Gov't
Agency Instruments total
market value $1,595,381))..... 1,547 1,547 1,547 1,547
------- ------
Total Repurchase Agreement
(Cost $1,547, $0, and $1,547
respectively)................. 1,547 1,547
------- ------
Total Investments -- 41.8%
(Cost $26,061, $15,740, and
$17,287 respectively)......... 30,136 19,154 (28,589) 20,701
------- ------ ------
OTHER ASSETS AND LIABILITIES,
NET -- 58.2%.................. (111) 65 28,589 28,543
------- ------ ------- ------
TOTAL NET ASSETS -- 100.0%...... 30,025 19,219 0 49,244
======= ====== ======= ======
</TABLE>
See Notes to Pro Forma Combining Financial Statements
17
<PAGE> 75
ARK INTERNATIONAL EQUITY PORTFOLIO
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999 (UNAUDITED)
(IN 000'S)
<TABLE>
<CAPTION>
ARK
ARK INTERNATIONAL
INTERNATIONAL GOVETT EQUITY
EQUITY INTERNATIONAL PORTFOLIO
SELECTION EQUITY PRO FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Identified cost of securities........................ $ 26,061 $15,740 $(24,514) $ 17,287
Net unrealized gains on securities................... 4,075 3,414 (4,075) 3,414
--------- ------- -------- ---------
Market value of securities........................... 30,136 19,154 (28,589) 20,701
Cash................................................. 36 92 128
Foreign currency (Cost $0, $28, $28 respectively).... 28 28
Receivable for securities sold....................... 40 28,589 28,629
Dividends and interest receivable.................... 52 39 91
Receivable from related parties...................... 0 3 3
Prepaid expenses and other assets.................... 3 56 59
--------- ------- -------- ---------
Total assets....................................... 30,227 19,412 0 49,639
--------- ------- -------- ---------
LIABILITIES
Distributions payable................................ 0 0 --
Payable for securities purchased..................... 63 63
Payable for Fund shares redeemed..................... 176 24 200
Advisory fee payable................................. 16 16
Distribution Plan expenses payable................... 9 9
Accrued expenses and other liabilities............... 26 81 107
--------- ------- -------- ---------
Total liabilities.................................. 202 193 395
--------- ------- -------- ---------
NET ASSETS......................................... $ 30,025 $19,219 $ 49,244
========= ======= ======== =========
NET ASSETS REPRESENTED BY
Paid-in capital -- Institutional Class............... $ 22,887 $ 6,932 $ 29,819
Paid-in capital -- Retail Class A.................... $ 1,820 $ 7,096 $ 8,916
Undistributed net investment income or loss.......... 48 1,234 1,282
Accumulated net realized gains on securities and
foreign currency transactions...................... 1,195 543 4,075 5,813
Net unrealized gains on securities and foreign
currency transactions.............................. 4,075 3,414 (4,075) 3,414
--------- ------- -------- ---------
TOTAL NET ASSETS....................................... $ 30,025 $19,219 $ -- $ 49,244
========= ======= ======== =========
NET ASSETS CONSISTS OF
Class I.............................................. $ 28,029 $ 7,539 $ 35,568
Class A.............................................. 1,996 11,680 $ 13,676
--------- ------- -------- ---------
TOTAL NET ASSETS....................................... $ 30,025 $19,219 $ 49,244
========= ======= ======== =========
SHARES OUTSTANDING
Class I.............................................. 2,249,641 606,543 (1,499) 2,854,685
Class A.............................................. 160,234 943,538 (6,154) 1,097,618
NET ASSET VALUE PER SHARE
Class I.............................................. $ 12.46 $ 12.43 $ 12.46
========= ======= ======== =========
Class A.............................................. $ 12.46 $ 12.38 $ 12.46
========= ======= ======== =========
Class A (offering price @ 1.50% and 4.75% combined
sales load)........................................ $ 12.65 N/A $ 13.08
========= ======= ======== =========
</TABLE>
See Notes to Pro Forma Combining Financial Statements
18
<PAGE> 76
ARK INTERNATIONAL EQUITY PORTFOLIO
PRO FORMA COMBINING STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999 (UNAUDITED)
(IN 000'S)
<TABLE>
<CAPTION>
ARK
ARK INTERNATIONAL
INTERNATIONAL GOVETT EQUITY
EQUITY INTERNATIONAL PORTFOLIO
SELECTION EQUITY PRO FORMA
PORTFOLIO FUND ADJUSTMENTS COMBINED
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld)...... $ 540 $ 360 $ 900
Interest....................................... 70 6 76
------ ------ ----- -------
TOTAL INVESTMENT INCOME.......................... 610 366 976
------ ------ ----- -------
EXPENSES
Administrator Fees............................. 39 149 (126)(1) 62
Investment Advisory Fees....................... 190 186 102(2) 478
Custodian Fees................................. 20 7 27
Transfer Agency Fees........................... 3 64 (62)(3) 5
Professional Fees.............................. 3 70 (48)(4) 25
Registration Fees.............................. 3 16 (8)(5) 11
Distribution Fees
Retail Class A.............................. 7 40 5(6) 52
Printing Fees.................................. 4 -- 4
Trustee Fees................................... -- 33 (32)(7) 1
Amortization of Deferred Organization Costs.... 2 -- 2
Miscellaneous Fees............................. 2 16 (11)(8) 7
Shareholder Servicing Fees..................... -- --
Institutional Class......................... 41 11(9) 52
Retail Class A.............................. 2 18(9) 20
------ ------ ----- -------
Total expenses................................... 316 581 (151) 746
Fee waivers and reimbursements......... (41) (173) 150(10) (64)
------ ------ ----- -------
Net expenses................................ 275 408 (1) 682
------ ------ ----- -------
NET INVESTMENT INCOME OR LOSS............... $ 335 $ (42) $ 1 $ 294
------ ------ ----- -------
NET REALIZED AND UNREALIZED GAINS OR LOSSES ON
SECURITIES AND FOREIGN CURRENCY TRANSACTIONS
Net realized gains or losses on:
Securities.................................. $1,706 $2,107 $ 3,813
Foreign currency............................ -- 36 36
------ ------ ----- -------
Net realized gains or losses on securities
and foreign currency transactions......... 1,706 2,143 3,849
------ ------ ----- -------
Net change in unrealized gains or losses on
securities and foreign currency
transactions.............................. 4,428 2,006 6,434
------ ------ ----- -------
Net realized and unrealized gains or losses
on securities and foreign currency
transactions.............................. 6,134 4,149 10,283
------ ------ ----- -------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ $6,469 $4,107 $ 1 $10,577
------ ------ ----- -------
</TABLE>
---------------
(1) Adjustment to reflect administrator fees for the combined fund based on the
administrator fee rates in place for the acquiring fund during the period.
(2) Adjustment to reflect advisory fees for the combined fund based on the
restated pro forma advisory fee rates in place for the acquiring fund.
(3) Adjustment to reflect transfer agency fees for the combined fund based on
the transfer agency agreement in place for the acquiring fund during the
period.
(4) Adjustment to reflect the reduction in audit and professional services
fees.
19
<PAGE> 77
(5) Adjustment to reflect the reduction in registration and filing fees.
(6) Adjustment to reflect distribution fees for the combined fund based on the
distribution fee rates in place for the acquiring fund during the period.
(7) Adjustment to reflect the reduction in trustees fees to the level of the
acquiring fund.
(8) Adjustment to reflect the reduction in miscellaneous fees.
(9) Adjustment to reflect shareholder service fees for the combined fund based
on the service fee rates in place for the acquiring fund during the period.
(10) Adjustment to reflect fee waivers necessary to limit overall fund expenses
to the acquiring fund's contractual ** limit on an annual basis, of average
net assets.
** The acquiring fund's adviser has contractually agreed to waive fees and
reimburse expenses in order to keep the total operating expenses from
exceeding 1.50% and 1.40% for Retail Class A and Institutional Class
respectively for the period ended 8/31/01.
See Notes to Pro Forma Combining Financial Statements
20
<PAGE> 78
ARK INTERNATIONAL EQUITY PORTFOLIO
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
OCTOBER 31, 1999 (UNAUDITED)
1. Basis of Combination -- The Pro Forma Combining Schedule of Investments, Pro
Forma Combining Statement of Assets and Liabilities and the related Pro Forma
Combining Statement of Operations ("Pro Forma Statements"), reflect the
accounts of ARK International Equity Selection Portfolio ("International
Equity Selection Portfolio") and Govett International Equity Fund
("International Equity Fund") at October 31, 1999 and for the year then
ended.
The Pro Forma Combining Financial Statements give effect to the proposed
Agreement and Plan of Reorganization (the "Reorganization") to be submitted
to shareholders of International Equity Fund. The Reorganization provides for
the acquisition of all assets and the identified liabilities of International
Equity Fund by International Equity Selection Portfolio, in exchange for
Class A shares and Institutional shares of International Equity Selection
Portfolio. Thereafter, there will be a distribution of Class A shares and
Institutional shares of International Equity Selection Portfolio to the
respective shareholders of International Equity Fund in liquidation and
subsequent termination thereof. As a result of the Reorganization, the
shareholders of International Equity Fund will become the owners of that
number of full and fractional Class A shares and Institutional shares of
International Equity Selection Portfolio having an aggregate net asset value
equal to the aggregate net asset value of their respective shares of
International Equity Fund as of the close of business immediately prior to
the date that International Equity Fund net assets are exchanged for Class A
shares and Institutional shares of International Equity Selection Portfolio.
The Pro Forma Combining Financial Statements reflect the expenses of each
Fund in carrying out its obligations under the Reorganization as though the
merger occurred at the beginning of the respective periods presented.
The information contained herein is based on the experience of each Fund for
the respective periods then ended and is designed to permit shareholders of
the consolidating mutual funds to evaluate the financial effects of the
proposed Reorganization. The expenses of International Equity Fund in
connection with the Reorganization (including the cost of any proxy
soliciting agents) will be borne by AIB Govett, Inc. It is not anticipated
that the securities of the combined portfolio will be sold in significant
amounts in order to comply with the policies and investment practices of
International Equity Selection Portfolio.
The Pro Forma Statements should be read in conjunction with the historical
financial statements of each Fund incorporated by reference in the Statement
of Additional Information.
2. Shares of Beneficial Interest -- The Pro Forma net asset values per share
assume the issuance of Class A shares and Institutional shares of
International Equity Selection Portfolio which would have been issued at
October 31, 1999 in connection with the proposed Reorganization. Shareholders
of International Equity Fund would receive Class A shares and Institutional
shares of International Equity Selection Portfolio based on conversion ratios
determined on October 31, 1999. The conversion ratios are calculated by
dividing the net asset value of International Equity Fund by the net asset
value per share of the respective class of International Equity Selection
Portfolio.
3. Pro Forma Operations -- The Pro Forma Combining Statement of Operations
assumes similar rates of gross investment income for the investments of each
Fund. Accordingly, the combined gross investment income is equal to the sum
of each Fund's gross investment income. Pro Forma operating expenses include
the actual expenses of the Funds. The pro forma combined expenses were
calculated by applying the International Equity Selection Portfolio expense
rates to the pro forma combined average daily net assets of the two funds for
the twelve months ended October 31, 1999. The adjustments reflect those
amounts needed to adjust the combined expenses to these rates. The
non-contractual expenses were adjusted to approximate the actual expenses of
the combined fund as of October 31, 1999.
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